While no industry is immune to the forces of economic recession, some sectors hold up better than others. It’s knowing where and when to invest in them that make all the difference.
That was the consensus of a panel of experts convened April 5 in San Diego for a frank discussion on “Developing Recession-Proof Industries” at the World Forum for FDI, organized and managed by Conway Events of Atlanta-based Conway Inc.
“Early-stage tech companies thrive during recessions,” said Tugce Ergul, executive director of Angel Labs in Silicon Valley. “Technology makes our lives better in the real world. Entrepreneurs love working through hard times, and they thrive during recessions.”
Dr. Kara Bortone, head of company sourcing for JLABS, a Johnson & Johnson entity, agreed, noting that “healthcare-related fields are some of the most recession-proof industries. Bacterial infection prevention and care are very strong right now, and will be for many years to come.”
Anupam Govil, partner at Avasant, said that “we are going through some fundamental shifts in the global economy right now. If you have not yet read The Second Machine Age [a new book by MIT’s Erik Brynjolfsson and Andrew McAfee], you should. It describes the fundamental changes that are underway.”
Tech Hubs Rule
The key to navigating one’s way through recession, or better yet, preparing for one, is to know what to look for when considering a foreign direct investment, concluded the panel. Among their collective advice:
- The new machine age “is about automating knowledge-based tasks,” said Govil. “This is resulting in big shifts in the way that work is done. Recession-resistant industries will have to depend on knowledge, innovation and automation. Invest in locations and companies that have these components.”
- “You need to look at locations with a more granular lens,” said Govil. “I would avoid places of conflict — Syria, Lebanon, Kuwait, Ukraine, etc. A notable exception to this rule is Israel. It has some of the best talent.”
- “We look for technology hubs,” said Ergul. “We have been doing this for a little over two years, and governments always ask us, ‘How can we turn our cities into the next Silicon Valley?’ What we are trying to do with Angel Labs is build angel investor ecosystems. We teach them how to invest in early-stage businesses.”
- “We look for academic institutions and funding for new ideas,” said Bortone. “We look for an entire ecosystem. We have many tools to help entrepreneurs.”
- “The key is to focus on skill development in the critical sectors,” said Govil. “Trinidad, for example, is the near-shore hub for financial transactions. There is no short answer to this. It depends on what you are targeting. You have to invest into developing the knowledge capital. That is very important in the digital age.”
Ergul said it is not easy to attract startups in technology.