Europe had three elections on the weekend: presidential in France, parliamentary in Greece and regional in Germany. The results are strongly anti-incumbent across he board. In France, Sarkozy is out and Hollande is in. In Greece, the PASOK party went from 160 to 41 seats and no longer has a majority together with New Democracy the other incumbent. And in Germany in the regional elections in Schleswig Holstein, Angela Merkel’s CDU had the worst results since 1950.
The results are also strongly anti-austerity because that was the policy pursued by the incumbents. The Euro is now at a 3 month low, European stocks are down with the Greek market down 6% and Nasdaq Futures are down also. This comes on the heels of a 2.25% decline in Nasdaq this past Friday based on weak US jobs data. The risk that Europe will come apart with nations exiting the Euro and significant political and social upheaval to follow is now bigger than ever.
I had written last August that startups should raise money ASAP and I was wrong then. Europe managed to kick the can down the curb, the markets rallied and venture funding remained reasonably strong. I may well be wrong again now because we are dealing with probabilities but it should be pretty clear that the probability of Europe coming apart has gone up meaningfully with these elections.
What does that mean if you are a startup? Again, I believe if you know you have to raise money soon, you should do it even sooner than you thought you would. And if you have an existing strong syndicate you need to control your burn so that syndicate can finance you should new financing dry up. The music can stop at any moment and when it does the change is dramatic.
