Tech Entrepreneurship Recession – Microsoft Yahoo – Tea Leaves;

War! What is it good for! Absolutely nothing! – Say it again!

Are wars really good for business? Is tech entrepreneurship in recession heading toward depression? The battle between Microsoft and Yahoo is reaching it’s climax (if not already). However, there are some very interesting and unique perspectives come from two blog posts that jumped out at me – Kara Swisher and Fred Wilson. Kara has the funniest headline saying “Jesus is coming” with the storyline about the inside scoop on the ‘dance’ between the two. What strikes me with Kara’s post is that Yahoo might already be defeated in the ‘braindrain’ that they have been experiencing. Even if Yahoo survives is it already dead on the vine?

Fred Wilson only draws a reference to the battle in his post about liquidity – saying that with no IPO market we are in trouble and worse the tech giants are playing with assets like toys. I think that Fred is on to something with no liquidity (other than M&A by big firms). Is this really a robust market for innovation where the big guys are doing all the acquiring? Is this the ecosystem that produces good entrepreneurship?

What ties both these posts together is the trend that acquisitions might not be the best for innovation – Kara bluntly states that AOL’s acquisitions aren’t doing well. While Fred says it’s great to get the cash but Yahoo hasn’t done well with their acquisitions. Meanwhile the capital markets are a mess.

As an entrepreneur with four kids I’m concerned about the prospects for all entrepreneurs in this current environment. Maybe I’m just not feeling good today. Startups should have some friction, but not outright frustration. I’ve been doing early stage startups for 10+ years and never seen this much frustration since 2002-03. We are in a tech recession or at least a grinding halt.

I’m one of the most optimistic guys (all entrepreneurs are), but my mood on this startup market: Bear

Author: John

Entrepreneur living in Palo Alto California and the Founder of SiliconANGLE Media

12 thoughts on “Tech Entrepreneurship Recession – Microsoft Yahoo – Tea Leaves;”

  1. Well that’s not good news. What is good news is that even in a market that’s moving in the opposite direction, there are still good ideas. And I believe that in the end, the ideas will win. So it might not be good in the short term from an acquisitions perspective, but from a consumer perspective, innovation is always good. And if it’s good enough, the entrepreneurs will win in the long run.

    At least that’s what I keep telling myself.

  2. C’mon John. I get your sense of despair but this is a time to double up on the smartness and execution.

    Tough times are great for filtering talent.

  3. Ryan and Brij,
    People who know me all know i’m sometimes overly optimistic. Maybe I didn’t get much sleep last night but I’m sensing the frustration from vc like Fred post all over the place. Call it jitters from the global economy but early stage startup work is hard enough.

    I do agree with you Brij that smartness is a premium but if the capital markets are fickle and jittery then that trickles down to the trenches.

    The big question in my mind is will this dynamic move into the angel investing market.

  4. John, I think you are right on most of the points. The picture is not pretty from any point of view.

    My only solution for our own micro business climate is to try to be more productive and focus on the planned goals, investment and development tasks. Other than that – what else can we do?

  5. John,

    You’re right on the money. We are in a tech recession. I don’t interpret your view as pessimistic, simply realistic.

    The big guys (G,Y,M) are jockeying for position and grabbing market share. The fallout for tech startups has just begun.

    As W. Chan Kim and Renee Mauborgne have argued, cutthroat competition results in nothing but a bloody “red ocean” of rivals fighting over a shrinking profit pool.

    It wasn’t surprising that Arrington ignored the best interest of tech startups when he scheduled the 50 head-to-head with DEMO.

    Many execs I’ve spoken with call it a desperate move because TC has fewer startups to choose from and fewer of the chosen 50 will receive significant funding, as in past years.

    I don’t agree. Arrington’s not desperate; he just believes he can kill a conference competitor.

    In the short run, that may hurt some tech startups. In the long run, it could lead to a TC 100.

  6. After 18 mths of interviews of startups in tech, I must say that not too many have a good economic engine. It’s like the tech industry has moved to entertainment and not increased productivity or automation. Business strategy is put lipstick on a pig and flip as quickly as possible. Where is the next Adobe (or Macromedia that pressures the market)? Is there another that will shake the core of a player like Siebel? Finally, I’ve never seen the enterprise software market move so slow. They don’t want change. Is it because IT managers have too much power or see no increase in productivity from existing solutions.

  7. We are in an American depression, not a tech depression. The dollar is falling, inflation is rising, and people are losing their homes. If you feel uneasy, you are not alone. Immerse yourself in family for a while, and take your company less seriously. It’s a cycle. But it’s a deep low in a cycle, for different reasons from 2001.

  8. Francine,
    I’m not feeling that uneasy because I’m building a startup right now. But I believe that the ‘trickle down’ effect from entrepreneurial centers like Silicon Valley will impact the world entrepreneurship climate. It’s about the capital markets as Fred pointed out. Unlike 2002-04 there is real opportunity in the evolution of the modern web so developers have a chance. My point is that without a robust investing climate the strategy to build companies needs to change. Companies need to be built from the ground up to be sustainable from day one. That means it’s all about the business model to enter the market not the ‘vision’ of the business model which is a crap shoot.

    Brad’s comment above is correct – too many businesses with the strategy of putting ‘lipstick on the pig’ reminds me of the first web crash. I see it differently there is ‘real’ opportunity today for tech entrepreneurs – lets see how the early stage investment market handles it. Today unlike 2002-4 there is angel investment activity. In those dark tech years you couldn’t find an angel anywhere. Today there is a new category of investor (angels, ex googlers, retired tech entrepreneurs..etc) who invest 50k-250k. Lets hope that continues.

  9. I’d go bull, personally. All systems say “go”, double checking, triple checking the pre-flight launch checklist, though. Stay tuned. 🙂

    @John Furrier What kind of strat-up did you have in mind? If you really believe in your idea, take it to The Valley. There really is no trickle down effect. Those who are waiting for that, will be disappointed. If you want the dream, you have to sell the house, pack it all up in boxes, and go for it. One thing about the valley, is failure is tolerated, just make sure you turn out a winner, every once in awhile. If nothing else, you’ll learn alot, there. Have fun! 🙂

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