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“Angel investor” is one of the best names in the business literature. Maybe, too good a name, to the extent that startups tend to perceive this category of investors as a solution to all problems, which is not. That is why I've tried to place it in two ecosystems. You'll find out what an angel investor may and, especially, may not be. 

The Money Ecosystem

The first ecosystem is time-related and refers to the capitalization cycles of a startup. Briefly, an angel investor turns up, as financer, sometime after the founders, but before the capital that demands a completely quantifiable and repeatable Return on Investment. Using bullet points, the ecosystem looks like this:

• Founders: Naturally, they are the ones who start the business, but from the point of view of the resources invested, the contribution in capital is small and this is compensated by work and ideas.
• Angel Investor: It comes after the founders phase and takes a high degree of risk in exchange for a (minority) part of the business, which will be monetized only in case of success and only after a number of years.
• Venture Capital: As different from the Angel Investor, it is an institutional form of financing, even if it includes taking risks for remote benefits. A Venture Capitalist will bring about financing from third parties, as compared to the Angel Investor, which risks their own money.
• Mergers & Acquisitions/IPO:  In the exit phase (Mergers & Acquisitions) and/or during the phase of listing on the stock exchange (IPO - Initial Public Offering), the startup is on the brink of maturity, in the sense of a long term predictable profitability. The more available money, the stricter the financing conditions.

Ecosystem of the Organizations and People If the money ecosystem is time-related, the organizational one refers rather to a definite moment at the beginning of the evolution of a startup. From this point of view, the Angel Investor lives together with the founder among the following organizations and communities:

• Incubators: (Profit or non-profit) organizations that ensure business trainings and work spaces for startups. Most frequently, they are governmental programs and financing.
• Accelerators: These are similar to incubators, but are mainly focused on the growth process of a startup, than on facilities. In the USA, these are rather private than governmental, the same as in the case of incubators.
• Other types of mentors/consultants: Together with the Angel Investors, founders also work together with other experience holders, such as mentors (pro bono or financed by third party organizations) or consultants (which work for a definite fee).
• Communication/networking facilities: To more or less formal trade shows and clubs, you can add Web 2.0, groups ranging from specialized blogs to LinkedIn and other types of presence on social media.

As for financing, a successful entrepreneur will know to look for the appropriate kind of resources which match the growth moment of the business. As for people and organizations, a successful entrepreneur will be able to keep their eyes on the various opportunities available, irrespective of how much they would focus at a certain time on one of them.

  JP Morgan published, at the end of this October, a forecast for capital markets in 2019. While the general macroeconomic picture is positive, there are, however, certain developments that investors should consider. Here are some important trends you should be aware of: 

• Global GDP is rising. JPMorgan forecasts an increase of 2.5% in 2019, the same as in 2018. This is, of course, good news for the global economy, which translates into stable growth forecasts.
• Global economic growth in the long term (10-15 years) is 1.5% in developed economies (the US, Europe, Japan, etc.) and 4.25% in emergent markets (China, India, Brazil, Russia). The two ratios combined give the 2.5% ratio above.
• Cyclic risks are also increasing. Of course, this means that the current economic growth may be followed by a contraction. This may mean that a whole series of assets are currently overvalued. The impulse of any investor could be to sell in this particular case, but JPMorgan warns of illiquidity risk, which basically means that overvalued assets are very difficult to convert to liquidity. These matter in case of an accelerated growth economy, such as Romania, but the red flag raised by JPMorgan is far from apocalyptic. The report does not include scary words such as “crisis”.
• The estimates for the value of assets in North America are positive, from bonds to complex asset pools. As the US economy is (still) the strongest in the world, this trend has a positive effect at a global level.
• Inflation remains within reasonable parameters. JPMorgan makes a thorough forecast on the dollar, by saying that in the medium term, inflation will range below the targets of the American central bank, the Fed. In emerging markets, which Romania seems to be assimilated to, but not mentioned as such, the report speaks about a higher volatility potential. Still, given the strict policy of the National Bank of Romania (NBR), no spectacular oscillations are to be expected.

My conclusions

In short, the JPMorgan report could be characterised using a euphemism specific to the financial markets, as cautious-optimistic. If not for the 2008 crisis, the report would have probably been more optimistic. However, Fortune reports that JPMorgan set 2020 as the date of the next financial crisis. If we are to believe the media, this recession will be less severe than the one ten years ago. Either way, 2019 will be, as far as the analysts predict, a rather good year. However, as things tend to be cyclic in the global economy, I strongly believe that a drop is coming in the next 2-3 years, having seen as the market has grown significantly over the last 2, without any real support. One other thing I would mention,  and that could affect big economies to a certain degree, is the massive migration we have witnessed, to countries with strong economies, such as Germany. This will make a difference and will entail not only political, but also an economic effort in those countries. JPMorgan report can be downloaded in pdf format from here. You can also read the NBR report on inflation by following this link.

One thing everyone seems to agree on regarding the real estate market this year is that the amount of transactions has shrunk. Still, in spite of that, there are a lot of opportunities. Let’s review the different segments:

Market Segments

• Land: According to Colliers International, in some cases, the prices are half of what they were in 2007-2008, at the height of the real estate bubble in Romania. These circumstances are favorable to those who envisage complex development projects. Strictly speculatively, the liquidity in this segment is, however, very low.
• Houses/apartments: Sales are 40% lower compared to some of the most active years, also according to Colliers International. The “First House” state-guaranteed mortgage program did not work well. The banks have extended the terms for submissions, to no avail. As opposed to the period before the financial crisis, the residential sector is now a medium-long term business.
• Offices: They continue to be the star of the market. This was my reaso for going ahead with a recent successful transaction. Whatever office space was built during the recession has been occupied and the market has the ability to absorb the newly created spaces in the following years. According to Cushman & Wakefield Echinox, this will continue to be a market-growth engine. Of course, it is also worth noting that this segment has been very dynamic in big cities, such as Cluj-Napoca or Iași, where economic growth requires space for businesses.
• Commercial spaces have increased by 4.6 times compared to the level before the crisis, whereas street retail has dropped drastically, except for the space of traditional fairs. Experts forecast the development of large commercial areas for the real estate global players. Proof of that is one of the record deals this year - the purchase of the Militari Shopping retail park in Bucharest, for EUR 95 million by Prime Kapital and MAS Real Estate.

Developments over the Next Few Years

All experts I have been speaking to agree on the fact that the real estate market in Romania has entered a phase of maturity. The potential upcoming recession that everyone has been fearing will affect the real estate market in a nuanced way. It is hard to believe that we will witness another bubble followed by another crash the way it happened some ten years ago. On the contrary, the long-term development of the local economy will turn real estate into a growingly important (in volume) and lucrative market. The change of essence refers to what I have already written about before, namely that the market is changing from a speculative one, to one in which specialization and smart development strategies, based on high-quality market insights, give you the competitive advantage. For the information in this analysis, I have used the following sources:

• Adevărul
• Digi24
• Business magazin
• Agerpres/economica.net

The rumors about crisis have started to take shape: Romania might enter a recession – “technical” for the time being, that is two quarters without economic growth – in the second part of next year or in 2020, according to the chief economist for Central and East Europe with Unicredit, Dan Bucșa (Source: Agerpres). Here is my take on several consequences of the so-called technical recession. 

What Technical Recession Means

The unanimously accepted definition refers to two successive quarters of economic contraction. Since the contraction is measured on the Gross Domestic Product (GDP), we may say that economic recession is just a first signal that a growth cycle of an economy is about to end. More somber terms, such as depression or crisis, refer to the subsequent effects: increase in the unemployment rate, inflation, decline in the purchase power, then production and so on. History shows that economic crises are frequent, but they differ in respect of severity. Experts say that growth is the natural tendency of economy, but sometimes a peak followed by a decline happens. For instance, since the year 2000 we have already had two global crises. The best known and most severe one, of 2007-2009 (followed by recession), but also the Dot Com Bubble at the beginning of the ‘00s, when many Internet companies imploded. The “breaking of the online bubble” at the time affected Romania very little, as compared to the 2007 crisis. 11 years ago, the real estate global meltdown was more noticeable in Romania, as the country was already in a local real estate bubble. In other words, the economic statisticians can predict with a rather high degree of precision the decrease of GDP for two successive quarters, but the effects deriving from here are less predictable, especially from the point of view of severity and duration.

The Global Background and Romania’s Specificity

Besides the recent news regarding the decline on the stock exchanges, in principle, Romania’s economy is, first of all, interdependent with the other economies of the European Union and the forecasts are pointing at a slower growth in these economies. Most analysts have raised red flags because Romania’s surplus of a few good years was spent on state wages and other similar expenses, and this leads to a decrease in the efficiency of the economy on a medium term. Here is how Unicredit Chief Economist explains these things: “If Europe grows by 1%, it is likely that we will avoid recession. If, however, it grows by less than 1%, then chances are that a recession will follow. Our forecasts indicate a slower pace of the economy in 2020 by about 2%.” As usual, the official sources are far more optimistic in respect of the years 2019 and 2020. Still, the global slowing of the economy is not a fact that can be denied or ascertained from Bucharest.

What Effects We Will Feel on a Personal Basis

Once again, according to this forecast, recession will be felt in business and in the pockets of each of us only by means of its consequences. If a safe workplace or the negotiation in Euro of the contracts/salaries is precautions within anybody’s grasp, it is more interesting to see what happens with the personal surplus of money. Forbes publishes an article that includes two recommendations worth noting:

• Avoid emotional behavior. The most common advice “buy cheap, sell expensive” is very difficult to apply in investments. This is proven by the fact that the assets of the American investors have increased over the last 20 years by only 2.5%. To give another example, without a massive demand, cryptocurrencies would not have increased in value so much until 2017, only to decrease dramatically over the last few months. Somebody invested and subsequently lost that money, contrary to the axiom “buy cheap, sell expensive”. Paradoxically, this means that in a recession or crisis, there are plenty of bargains/understated assets. However, these are difficult to identify and profited from.
• Make several personal sub-pools, according to age and plans. If you are still active, a “safety net” comprising an amount sufficient to secure your lifestyle from three to six months should be enough. If you are about to retire from professional life, safe investments will have to provide a sufficient amount for many years. Optimistically speaking, at such point in time, the accrued surplus is higher, which means that other sub-pools, more risky, could be well represented.

In a nutshell, both personally and businesswise, the latest rumors suggest prudence, but they are not at all a reason to panic. Most of us went through our crisis apprenticeship ten years ago, which means that we will know how to behave logically and non-emotionally in the following recession, no matter when it might come and how severe it might be.

The economic history helps you understand the present much better. For instance, you cannot realize why bank loans are a capitalization method more problematic than the risk capital, for startups, if you don’t know that the Dot Com Bubble and the 2007 Crisis have dramatically harshened the loaning conditions of the banks. Starting from this idea, I have made up a timeline of the setting up and development of stock exchanges. Assets started to be traded as far back as the Roman Empire, but after the Middle Age, economic innovations have precise dates.

• 1460: The First Stock Exchange in the World, in Anvers. It traded mostly bonds, but it was also a meeting place for those who lent money and officials.
• 1602: The First IPO (Initial Public Offering), for the Dutch company of East Indies. It was a megacorporation avant la lettre, specialized in maritime trading and transports with the East and Africa, an organization which also had military power.
• 1801: London Stock Exchange - LSE. The first share offering occurred there in 1825. Also at that time, there is recorded the occurrence of some abstract deeds, which made successive transfers possible, after for a long time practice had only allowed specific agreements between traders who had known each other.
• 1817: New York Stock Exchange, based on the model of the Philadelphia Stock Exchange, the first one founded in the USA. NYSE has been operated in the current building since 1865. The London and New York stock exchanges became in the first part of XIX century the main pillars of the international financial system. Currently, the New York Stock Exchange is the most powerful in the world, with a total capitalization of over $ 19 trillion and the NYSE composite index is considered the most relevant in the world, thanks to the quality of the companies considered and the huge volume of deals.
• 1878: Tokyo Stock Exchange, the core of what would become in 2013 Japan Exchange Group, further to successive mergers, of which the last one being with the Osaka Stock Exchange. The unofficial name is still the Tokyo Stock Exchange. It is worth mentioning the late date of founding, started in 1850, which is related with the accelerated modernization of the Nippon Empire. The Tokyo Stock Exchange, is the fourth most powerful in the world after New York, NASDAQ and London.
• 1891: Hong Kong Stock Exchange, operational under this name since 1914, after it had been founded in 1891 under  the name of Association of Stockbrokers in Hong Kong, against the background of the prosperity related to the statute of enclave of the British Empire. The reputation of global financial center has remained unchanged after the transfer of sovereignty from the UK to China in 1997. Besides the volume of deals, the Hong Kong Stock Exchange distinguishes itself by a high number of IPO.
• 1929: The Crash on Wall Street. The most severe crisis in recent history started because of an excess of speculation of the assets. Due to the prosperity of the twenties, most stocks and other values were constantly appreciating, up to prices that proved unsustainable.
• 1971: NASDAQ, the first electronic stock exchange (National Association of Securities Dealers Automated Quotations). After launching, it has made its brokers unhappy as a result of the decrease in the margin between demand and supply, triggered by the electronic trading. The same decrease, however, has made the market more dynamic, because it has been in favor of the investors.
• 1990: Shanghai Stock Exchange. With a tradition going back to mid XIX century, the fifth most powerful stock exchange in the world ceased operations after the instatement of communism in China.
• 2000: Euronext, a pan-European stock exchange, created by the mergers of the stock exchanges in Amsterdam, Brussels and Paris, with operations in the three cities and in London, Lisbon and Dublin. After a complicated history of mergers and acquisitions, it has become the second most important stock exchange in Europe, after the one in London. It has a creative strategy, which encourages the financing of small and medium size companies, by operations called Alternext and Enternext.

Sources:

• ICMSS
• Wikipedia
• World Atlas

Last summer, Japan and the European Union signed a historic free trade agreement, regarding food products, cars and long lasting development products, among other things. There is a new ambassador in Bucharest and we do no longer need a visa for the short term trips to Tokyo or Osaka. Most certainly, Japan is a country full of opportunities and I have started by sorting out the famous problem of Japanese business etiquette. Here are a few recommendations I've verified from several sources: 

• Punctuality is a must not only in respect of the start time, but also the end time. Be highly ceremonial, remembering that not only handshakes, but even tapping on the shoulder or any kind of physical touching are not desirable. Jokes also. First names are used only at the express invitation of the interlocutor, in a long lasting relationship. The well-known bow should be avoided, unless well practiced in advance.
• Business cards are strictly necessary. Order some in Japanese and here is why: they are produced and studied carefully at the beginning of the meeting and all this even bears the name of a ritual, meishi. You are supposed to also read carefully the card received.
• “No” is not “no”, as the Japanese almost avoid to utter it. It is suggested by a whole series of euphemistic strategies, such as laterally shaking of the head, changing the topic of discussion or silence altogether. You should avoid saying “maybe” or “we will consider this”, as in the Western culture this means rather “yes”, whereas in Japan it is the opposite. 
• Be careful with “Sayonara”. We have all heard it said in Japanese animes and we may feel tempted to use it, but it may mean “farewell”, rather than “see you soon”. At the end of a meeting regarding an ongoing negotiation, it may indicate that you are not willing to continue the talks.
• A translator is absolutely necessary, unless you speak fluent Japanese. Even if they do speak good English, more traditional businessmen will avoid using it directly.
• Decisions are not made in a topic specific meeting. You may be impressed by the extended participation of the Japanese party, but you shouldn’t wonder how such an extended delegation will make a decision in a meeting, because they won’t. To the Japanese, the purpose of the meeting is to gather information. The decision is made subsequently, further to an elaborated process and it will be communicated to you afterwards.

If you are lucky enough to have a less ceremonial business partner, enjoy it! Bear in mind, however, that their effort to adopt the western practices is, after all, also a proof of extreme traditional politeness. Anyhow, it is recommended that you should avoid risks, especially during first meetings. My sources:

• Business Travel
• Today Translations
• EU Business in Japan