Last July, we started this newsletter with 500 subscribers. Over the past 76 weeks, sharing business and investment insights, our subscribers have grown to 40.5k. As we enter the festive spirit, we are taking a break to revamp our newsletter and bring you the all-new version on 8th January 2023.
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While football fans worldwide look forward to the FIFA World Cup with fervour, this sporting event has an even greater significance for the host country.
No surprise then that in 2022, Qatar, the host country, saw an unbelievable transformation. The FIFA World Cup brought much more than just football to Qatar - infrastructural development, jobs, and a boost to tourism. Financial analysts estimate Qatar’s GDP to rise by 4.1% by the end of this year because of the World Cup.
-The World Cup is predicted to bring 1.5 million tourists to Qatar. After receiving the hosting rights, an estimated 1.5 million jobs have been created.
-Qatar’s economy is expected to be the fastest growing in the Gulf Cooperation Council in 2023 and 2024. At present, the economy of Qatar is one of the highest in the world, based on GDP per capita of $82,887.
-From 2016 to 2022, the foreign direct investments (FDIs) in Qatar have exhibited a significant compounded annual growth rate (CAGR) of 32% in projects, 28% in jobs, and 19% in capital expenditure. The World Cup is expected to propel this growth further.
Qatar is now well-positioned to reap the long-term economic benefits of the World Cup. With the infrastructure upgrades, Qatar has made its mark on the world map, and the country is expected to benefit from increased tourism and trade.
Qatar is also investing in entertainment and sports to diversify its economy. Amidst reports claiming that the money spent was much more than the income generated from the World Cup, it remains to be seen how Qatar can capitalize on the infrastructure and other investments made for the event.
As images of the exuberant victory parade flashed across screens worldwide, the craze around football and the G.O.A.T Lionel Messi was evident. As Argentina brought home the World Cup trophy after 22 years, the country saw celebrations like never before.
This victory has brought much-needed distraction from the country's economic woes. With the economy shrinking and unemployment rising, Argentina's inflation is at a record high of 40%.
-Argentina's budget deficit has been a significant cause of inflation. The Government's spending and deficit have fuelled inflationary pressures. To further worsen the economic conditions, the Argentine Peso has fallen 36% since January 2022. The currency value has fallen 84% from 2018 levels.
-The Argentine peso's fall has made debt servicing harder. Unable to pay creditors on time has increased interest payments, thus straining the economy. This has created a vicious debt and inflation cycle, harming the country's economy.
Sports and entertainment are powerful. They provide a much-needed distraction from the day-to-day struggles of life. As was evident from the FIFA World Cup, sports allow people to come together and enjoy a moment of national pride.
However, it is essential to remember that this is only a temporary euphoria. Once the celebration stops, the residents still face the same economic and infrastructural issues as before. The Government needs to address the underlying financial problems to create a stable and prosperous future.
Facebook's parent company, Meta Platforms Inc., announced that it will devote about 20% of its overall costs and expenses to Reality Labs in 2023. Reality Labs is Meta's business division focused on augmented and virtual reality and the metaverse.
-In 2021, Meta Platforms Inc. acquired two companies and invested $50 million in a new venture capital fund to invest in the metaverse.
-Meta has reportedly invested $350 million in the Reality Labs division in the first half of 2022 alone. It has also acquired several companies in 2022 to further its vision of the metaverse.
Despite the current failures of the metaverse, investments in futuristic technologies can pay off in the long run.
Facebook's 20% investment in the Reality Labs division is a testament to this and shows that the tech giant is willing to take risks and back up its faith in the potential of augmented and virtual reality.
Time will tell if the metaverse will live up to its promise, but it is clear that Meta is determined to make it a success.
Is there a way for startups to raise funds when reaching a valuation is tough? A convertible note is an option that more and more startups are using to raise funds and kickstart their businesses
A convertible note (or Compulsory Convertible Debenture) is an instrument companies use to raise money in the form of debt that later gets converted to equity. In essence, an investor loans money to the company, and instead of getting the principal and interest back, the investor receives equity.
This equity is acquired as per a pre-agreed discount to the valuation in the following equity fundraise. Recently, many startups, such as Udaan and Byju's, have used convertible notes to raise funds.
There are two probable reasons for startups to raise funds through convertible notes:
-For early-stage startups, it's difficult to determine the company's valuation when there's no or low revenue. Both founders and investors find it easier to raise funds through convertible notes.
When the startup raises its next round of funding, the equity value the note converts to is thus determined. However, since the early investors take on more risk, they typically get equity at a 10%- 35% lower valuation for their money compared to the next-stage investors.
-Due to the recent "funding winter" and the global economic scenario, startups are unable to raise funds at their preferred valuations. So even late-stage startups are raising funds with convertible notes right now.
Convertible notes are a good option to raise funds for businesses where it is difficult to ascertain the valuations.
But convertible notes do carry a risk. If the startup is unable to raise further rounds, it needs to repay the debt (maybe even by selling assets if there's a cash crunch.) On the other hand, the investor gets a low return instead of an exponential one had the note been converted to equity. Investors and founders of startups need to be aware of the risks and benefits of convertible notes as a way of raising funds.