Is Trump Good for Startups?
I get it.
But, like it or not, Donald Trump is still the President of the United States (at least at the time of this writing). That being the case, it’s worth examining how his economic policies will affect Americans — and, for the purposes of this blog post, startup operators in particular.
How Trump’s Economic Policies Affect Startups
Trump’s economic policies tend to favor large corporations. He champions fewer regulations, lower corporate tax rates, lower capital gains taxes, and corporate tax holidays — all of which have helped produced an incredible stock market run.
With a higher stock market comes corporations that spend their (paper and real) money much more freely then in a down market. When money flows, corporations can become customers of your startup. They can also choose to partner with you or advise you. They can also opt to invest in your startup, too — or even acquire it.
What’s more, higher stock prices means higher M&A valuations — which trickles down to startups. More money flowing through the system should mean more money available to startups either in the form of acquiring customers or attracting investments.
Venture capitalists raised record-breaking funds in 2015–2016. Their three to four year investment periods have already begun. They can’t wait out a Trump presidency. They have to make their moves soon — which bodes well for startups.
So, despite Trump’s election, let’s look for a silver lining: While the political situation is unpredictable and unstable, the economic one has the potential to help startups tremendously. We have record amounts of corporate and Venture capital waiting to be deployed.
Decreased Federal Funding
It’s no secret Trump has his sights set on reining in federal spending (except for the military and infrastructure) and regulations. Whatever your take on decreased federal funding, one thing is clear: A reduction in federal support pushes solutions to the private sector.
This presents many opportunities for startups, particularly in the following areas:
- MedTech/Digital Health
Trump’s war with the media may be counterproductive, but it has created an opportunity for other startup categories, including:
- News Apps
- Live Video and Media Tech
While it’s perfectly understandable to be repulsed by the fact Trump is in the Oval Office, dwelling on the negativity won’t change reality. The best approach forward is to do your best to see the good in any situation.
Take my word for it: The best business opportunities always present themselves at times of uncertainty. I started most of my businesses during a recession. Amazon, Netflix, Google and Facebook all grew out of the .com ashes and post 9/11 recession. Now that Trump is the president, it’s safe to say our times are quite uncertain — which sets the stage for investors.
Now for the Pushback
Most believe that the money flowing back into corporate coffers will be used for stock buybacks instead of M&A. That is 100% true — but only to a certain extent.
If over $1 trillion is repatriated at a lower tax rate as Trump has suggested and half of that money is used for stock buybacks, two things happen: The stock market still shoots up even more and corporations have up to $500 billion more money to play with.
Others believe that a rising stock market will lead to higher inflation which will lead to higher interest rates and a stronger U.S. dollar — all of which is bad for startups. Most of these things are true — except for the part about it being bad for startups.
Startups today have to be global. Trump’s “America First” policy underscores this more than ever. Should inflation become high and the dollar strong, overseas operations will suddenly become super cheap due to the strong dollar. (Trump’s immigration policy also leads to startups moving some operations overseas.) As startups discover the international markets, M&A opportunities that were never possible before will open up. And while the dollar will be stronger, there will still be a lot of foreign capital entering the United States — despite the Trump uncertainty, because the Trump uncertainty is less uncertain than the crisis in Europe.
While Trump’s ascension to the presidency may very well end up being a nightmare, founders and entrepreneurs should do their best to make the most out of a challenging and uncertain situation. The Donald may turn out to be a president that helps startups more than anyone could have ever imagined.