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Why should Start-Ups care about inflation? Because it may destroy their business models.

Students of MBA-Class “Entrepreneurship” of Prof. Sven Ripsas at Berlin School of Economics & Law, working on transfer of successful Start-Up-concepts between US and Germany both ways, were curious about potential impact of Inflation. Auf LinkedIn

5 main effects we came up with:

1. Based on my Inflation Markets Model we identified the markets and industries facing growing Demand Crisis and Recession effects soon. Clothing, Products with high immaterial price parts, like organic, fair trade, Gastronomy, Culture, Construction. Massively eroding sales shall destroy many business models.

My advice for a personnel planning app for construction companies successful in US: Postponing the introduction in Germany.

2. Recession is expected to last several years, energy costs will remain higher than prior to war constantly – Situation will not change soon. For new products even more difficult to enter the market successfully.

My advice for an organic skin care product: Analyze your target group again, is it big enough sustainably?

3. Same way we identified clearly that everything linked to fossile energy is declining, while products around substitutes like hydrogen, solar and energy saving products are offering potential.

Core question: Which market are you in? Most are loosing, some are winning.

4. Investors will act much more cautiously and picky. 1. They recognize the market effects on the business models. 2. Rising interest rates offer attractive alternatives again. 3. Their financial potential suffers: Investment capital looses its purchasing power over the next years, will they increase? Their own financial needs will grow with inflation and constantly higher costs – Spare capital will decrease. Their own income stream might be affected.

5. Germany is more severely affected than the US. US inflation is demand driven and can be tamed via interest rates. German inflation is supply shock driven, and this cause is not changeable by interest rates.

During our lively discussion, the students have been a little bit surprised how broad und substantial impact on Start Ups can be.

Supporting this international ambitious, creative students thinking so entrepreneurially has been a big joy to me. I wish them all success in their projects. Cooperation with Prof. Sven Ripsas has been super spontaneous and flexible, big pleasure, too.