Startup Bubble: Definition, Causes, Impact, and Tips for Dealing with It

The growth of startup companies has been rapid in recent years. According to Tirto.id, based on new ranking data as of June 3, 2022, Indonesia is in fifth place globally with a total of 2.383 startups in the country.

Over time, not all startups can last long. Some of them experience problems in business processes or are known as the startup bubble phenomenon.

Startup bubbles are a scourge because they mean losses, usually signaled by mass layoffs or massive cuts in operating costs. What exactly is the Startup Bubble? What caused it? Further information is in the text below!. 

What are Startup Bubbles?

Before discussing the startup bubble phenomenon in Indonesia, it is better if we examine the origin of the word “bubble burst” which is a scourge that is most avoided. 

According to Investopedia, a bubble burst is a cycle in the economy where the price of a product or asset rises sharply in a short period of time, followed by a rapid decline in price. This drop in price, which can be described as a contraction, is where the "breakdown" or "crash" occurs.

Typically, these sharp price increases are due to changes in investor behavior. However, in this context, company or start-up activities can be the main cause of this phenomenon. 

Causes of Startup Bubbles

Saturated Market

The reason for the first bubble burst was a saturated market. A saturated market can be the cause of the initial bubble phenomenon. Then why?

A saturated market is a condition indicating that the demand for a product or service has reached its peak. This makes it difficult for companies to sell their products. Apart from that, this is also because the market is sensitive to offers and discounts. Therefore, if the company does not advertise, the number of consumers will decrease.

The Products Are Not Competitive

The next reason is the product or service offered by the company cannot compete in the market. This resulted in the company losing market share or significant market share.

If the company does not perform well, it will certainly not satisfy stakeholders and investors. In addition, many new start-up companies have emerged so that the competition is getting tougher.

Difficulties in Financing

It is claimed that the reason for the next bubble burst was that startups had a hard time finding funding. This is because uncertain global economic conditions have caused investors to be more careful in disbursing funds to startups.

In addition, many startups still depend on funding to be able to run their business. Therefore, if a company does not get funding, it usually cannot operate normally. Investors are more selective

In relation to the previous question, the difficulty for start-up companies in applying for funding is because investors are now more selective in buying risky start-up stocks.

In addition to uncertain global macroeconomic factors, newly formed startups are also tightening competition to attract more investors. Moreover, if a company loses market share, its performance suffers. Naturally, this made investors think about funneling funds into this startup. 

Effect of Startup Bubble

The startup bubble phenomenon not only has a negative impact on business life in general, but also on employees. Here is more information about the bubble effect:

Financial Problems Getting Worse

The biggest impact of bubble bursting is the emergence of financial problems in start-up companies. This is due to difficulties in selling products and getting financial support from investors. Most startups still rely on investor funding. This causes financial difficulties for startups. 

End of Working Period (PHK)

The way companies save money is through layoffs. This often happens with Indonesian startups.

This decision was taken as a solution to avoid bankruptcy of the company. This is because companies that do not generate good income also experience difficulties in paying the salaries of their employees. 

From the explanation above, it can be concluded that the emergence of an economic bubble is highly dependent on company leadership, investment behavior or community needs. These three things are external things that are beyond the control of our society.

How to Deal with a Startup Bubble for Workers

Here are how-to's on what to do.

1. Improve your skills at work

Developing skills, especially skills related to your job, is a step in preparing for the bubble from now on. Because according to the Washington Post, qualified employees are in high demand at companies.

2. Show that you are a valuable asset to the company

The next thing you can do to burst Indonesia's startup bubble is to present yourself as a valuable asset to the company. According to Indeed, work safety is ensured by being a company asset.

3. Expand network

Networking gives you connections to places that can help with your job search. Networking also allows you to meet professionals from different industries. Of course you can get information there.

4. Prepare an emergency fund

Setting up an emergency fund is the next step in preparing for a bubble burst. An emergency fund can help you find a new job.

5. digital literacy

In the era of advanced technology and information, good digital skills are essential. Because almost all business processes are now online and using technical devices. Controlling various technological devices allows you to do a good job, which in the eyes of the company is also a plus. 

That's an explanation of the Startup Bubble, from understanding to tips for workers to deal with this effect in the world of work. Hope it is useful!