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Silicon Valley Economy – No Crater Here – Startups Still Happening – Revenue is King October 10, 2008

Posted by John in Technology.
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NYTimes is saying things are imploding in Silicon Valley, but there is no crater here.  The core Silicon Valley economy around startups, entrepreneurship, and veture capital is not imploding.  Sure Silicon Valley is affected by the public market meltdown, but remember there has been no public market for startups for some time.  Unlike the dot com bust which cratered the startup market, this crisis has not imploded the startup market.  In 2001 that crisis hit the VCs directly not this time.

Why?  The VCs still have money and will invest in early stage deals and Series A financings.  That is not true for Series B and Series C financings.  It’s turning into a game of survivor.

My advice to startups:  find people who can bring in revenue and find people who can quickly retool existing product that can generate revenue.  Sure the email about cost cutter goes without saying. The new marching order is get revenue and have products that generate revenue.

I expect some of the best innovation to occur.  Surival is the objective either by raising money from your VCs to outlast the competition or bring in sales revenue.  Either way outwit, outlast, and outplay your competition.

Comments»

1. Ajay Juneja - October 10, 2008

Hey John,

So I mostly agree with your post. Startups with good fundamentals and real revenue models, have the ability to last through this if they’re smart and lucky. If you have no revenue model, I think you’re toast. The key to survival is to get to revenue with as little leverage as possible…

…and yes we’re still able to raise money right now… in fact..ah crap I can’t post it as a public comment so email me and I’ll tell you🙂

2. John Furrier - October 10, 2008

Ajay,
I think that we’ll see funding because VCs will likely arbitrage the key sectors that will be no brainer growth areas.

Like I was saying early today in my post about Facebook that I think the big bets on the Internet side are platforms and technology. Web 2.0 is dead in the water right now.

3. Ajay Juneja - October 10, 2008

Yup… and we’re a platform…

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6. Allan - October 13, 2008

John – Some of the best VC investments were made after the dotcom bust. From a VC standpoint, valuations are much more favorable in a market trough. Good talent will also become more available. I’m anxious to see what the pressure of survival will produce in terms of real innovation rather than the incremental me-too ideas that have been cropping up at the very height of the funding cycle.


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