Sorry, Startups: Party's Over(alleyinsider.com)
alleyinsider.com
Sorry, Startups: Party's Over
http://www.alleyinsider.com/2008/10/vcs-angels-to-startups-look-out-for-that-meteor-that-just-hit-you-
28 comments
>We just need to buckle down, be cheap, creative and survive. Get to revenues quickly.
I think that's what the article is saying.
I think that's what the article is saying.
thats the problem isn't it? Almost all of these venture backed startups have been pissing money away left and right. This credit crunch won't affect those startups that are self funded. The only ones that'll be affected are those with huge staffs which they can't afford in the first place
Just because your startup is self funded doesn't mean you won't be impacted.
* If you charge money for a product and your customers are no longer willing to spend money, you're in trouble.
* If you rely on advertising for revenue and companies reduce their ad spending, you're in trouble.
* If you're hoping to get acquired and your potential acquirers are no longer able to spend money because of plummeting stock prices, you're in trouble.
* If you charge money for a product and your customers are no longer willing to spend money, you're in trouble.
* If you rely on advertising for revenue and companies reduce their ad spending, you're in trouble.
* If you're hoping to get acquired and your potential acquirers are no longer able to spend money because of plummeting stock prices, you're in trouble.
the difference is that a small team startup has to make a lot less revenue to survive. A big new startup on the other hand would have a few million a year just in salary expenses.
Credit crunch takes out financing, not just investment. And the current deep recession, or even depression, will destroy income.
It's not that easy.
It's not that easy.
> The big Web 2.0 blockbusters all started up with things were down.
Not to contradict your general point, but it's probably unwise to compare now with 2001/2002. That was not even close to a real recession. It ended with higher consumer spending than at the start. This time around consumption will plummet, possibly for years.
Not to contradict your general point, but it's probably unwise to compare now with 2001/2002. That was not even close to a real recession. It ended with higher consumer spending than at the start. This time around consumption will plummet, possibly for years.
Will is a strong word for so early.
Exactly. Enough already with the shadenfreuder. You get the sense that they're enjoying all the doom-saying.
I wonder if investors are proclaiming tough times simply because it's in their incentives to push down valuations :)
Seriously though,once "everybody" starts proclaiming the truth, it's usually a counter-sign that "everybody" is wrong.
It's harder to ride the bubble in a recession, but it's still possible to create great companies in downturns.
Seriously though,once "everybody" starts proclaiming the truth, it's usually a counter-sign that "everybody" is wrong.
It's harder to ride the bubble in a recession, but it's still possible to create great companies in downturns.
Exactly, see startups focusing on new energy, frugal living and international markets.
The way I see it, there are two big opportunities for startups in hard times.
Firstly, some old businesses will be shutting their doors, and every time a business closes down it leaves behind a bunch of unserved customers, who presumably could be served at a profit by a more efficient business.
Secondly, people will be more likely than they are in boom times to break out of their existing habits and move to a lower-cost competitor. If you can find a way of providing people with things they need at a lower cost than the existing players, you can grow really fast.
Startups which exist to provide people with new and innovative ways to poke each other, on the other hand, might not do so well.
Oh, and one additional idea to throw out there while I think of it: a site aimed at highly-skilled but newly unemployed workers, with a combination of job-finding tools and commiseration.
Firstly, some old businesses will be shutting their doors, and every time a business closes down it leaves behind a bunch of unserved customers, who presumably could be served at a profit by a more efficient business.
Secondly, people will be more likely than they are in boom times to break out of their existing habits and move to a lower-cost competitor. If you can find a way of providing people with things they need at a lower cost than the existing players, you can grow really fast.
Startups which exist to provide people with new and innovative ways to poke each other, on the other hand, might not do so well.
Oh, and one additional idea to throw out there while I think of it: a site aimed at highly-skilled but newly unemployed workers, with a combination of job-finding tools and commiseration.
Party? What party?
Oh, you mean the "We need to raise zillions to build our start-up, kthxbai" party?
Never joined that one.
I think the recession will be great for my start-up. It helps companies be more efficient and cut costs, and in a recession, that's exactly what they want.
Oh, you mean the "We need to raise zillions to build our start-up, kthxbai" party?
Never joined that one.
I think the recession will be great for my start-up. It helps companies be more efficient and cut costs, and in a recession, that's exactly what they want.
Haha likewise and I indirectly sell discretionary goods.
It's already becoming a self fulfilling prophecy. I think that's why Cuban is buying.
It's already becoming a self fulfilling prophecy. I think that's why Cuban is buying.
Cuban was talking about a market correction to oversold conditions, not at all about an impending economic rebound.
Understood. But the doom & gloom message isn't just affecting stock markets.
I think the recession will be great for my start-up. It helps companies be more efficient and cut costs, and in a recession, that's exactly what they want.
BINGO. Exactly. As long as companies are in business, they need to cut costs, and more than ever in a downturn. Startups should be able to thrive in that environment.
BINGO. Exactly. As long as companies are in business, they need to cut costs, and more than ever in a downturn. Startups should be able to thrive in that environment.
That is if your users or customers are not closing down...
And there are going to be many startups like that soon, after the Facebooks start laying off people. Oh, and many of those guys come with savings from six figure salaries to fund their solo projects.
The commercial IT market didn't learn to be lean after the dotcom/enron crash. Don't be too sure it will learn it this time, either.
And there are going to be many startups like that soon, after the Facebooks start laying off people. Oh, and many of those guys come with savings from six figure salaries to fund their solo projects.
The commercial IT market didn't learn to be lean after the dotcom/enron crash. Don't be too sure it will learn it this time, either.
i can see articles like this, and other chicken little articles and notices applying to big-funding startups, but what i haven't seen is how this applies to the little guys. me and my partners launched very recently (and were reviewed here, flowmingle.com for the curious), and we are currently unfunded. we're in the very very early stages of seeking funding, but on the scale of bubble money we're not looking for much -- just enough to move the servers to EngineYard and get a few ad campaigns out in a few major markets to start building a user base.
so in our case, i have a day job, and that job helps support the crew, both of which live very lean. i have the highest expense set (and the most experience, and can generate the highest salary) so i'm the one who works.
what does this mean for the little guys? is there still money out there for people who don't need a dump truck full, but still have a phenomenal idea?
these are the questions i'm looking to have answered. someone want to write that article?
so in our case, i have a day job, and that job helps support the crew, both of which live very lean. i have the highest expense set (and the most experience, and can generate the highest salary) so i'm the one who works.
what does this mean for the little guys? is there still money out there for people who don't need a dump truck full, but still have a phenomenal idea?
these are the questions i'm looking to have answered. someone want to write that article?
Forget your startup, I'd be more concerned with your day job with the overall economic downturn (unless your self employed).
If you're like me with a startup that "gets not respect" I wouldn't be too worried, as you/we were never part of this 'party' to begin with.
If you're like me with a startup that "gets not respect" I wouldn't be too worried, as you/we were never part of this 'party' to begin with.
We heard this before during the last dot bomb. given history, the best time to start is during bad economic times. Correct me if I'm wrong but didn't MS, Dell, and Apple all start during economically turbulent times?
You just have to survive the downturn. For recent winners (from the last dotbomb) I can only recall StumbleUpon being one of them. Anyone else remember any other old survivors and winners from the last downturn?
You just have to survive the downturn. For recent winners (from the last dotbomb) I can only recall StumbleUpon being one of them. Anyone else remember any other old survivors and winners from the last downturn?
Most of the survivors of the last crash are the huge players today -- Amazon, Yahoo, IAC, etc. The problem is, you don't remember the thousands of other companies that died, and how the survivors were mostly pretty big before the downturn hit. The little guys died, right along with the wasteful big guys.
Point is, you shouldn't kid yourself: a down economy is a terrible, awful, tremendously bad time to start a new company. (On the plus side, it's only a very bad time to be a small company, and a bad time to be a big company.)
Point is, you shouldn't kid yourself: a down economy is a terrible, awful, tremendously bad time to start a new company. (On the plus side, it's only a very bad time to be a small company, and a bad time to be a big company.)
I get bullish when everyone is freaking out, and I get worried when everyone is euphoric
I do too. The thing is, when it comes to tech, not everyone is freaking out (this forum is a good example). Too many people think that because they aren't VC-funded/are small/don't waste money/aren't consumer-facing/are smart/whatever, they're going to be fine. That's a bad strategy.
I'm more curious about what this means for the valuations of the post dot com bubble 1.0 titans like Facebook, Digg and others. They're not going to die of course but I wonder if their values will deflate.
We just need to buckle down, be cheap, creative and survive. Get to revenues quickly. But that doesn't mean its the end of the world.
This is when startups are made. The big Web 2.0 blockbusters all started up with things were down. Entrepreneurship is all about maximizing output using scarce resources. Lets do it then!