
Startups Best Positioned To Weather A Downturn - jasonlbaptiste
http://www.techcrunch.com/2008/09/30/startups-best-positioned-to-weather-a-downturn/
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tdavis
How about the profitable businesses that have taken far less funding, or none
at all? This list is ridiculous and only serves to perpetuate excessive
valuations, feature-not-business and built-to-flip strategies, and wasteful
investments.

It's an endorsement to take a ridiculous (or _any_ ) amount of funding based
on the thought that more money == better! This is moronic. If you're building
a business that _requires_ 20mm in capital to build out an infrastructure,
fine, but you damn well better have a business model and accurate profit
projections to go along with that.

But, whatever. Go ahead. Follow the TC Way(tm). Take a shit load of money with
no firm plan for spending it. Waste all your time trying to make good hires
then hire managers to manage those hires and VPs to manage them. Give most of
your company to a firm with deep pockets and far less knowledge of your
industry than you have. Give up most of your stake in the company. Hope to
Christ you do _really_ well so your business doesn't get folded into another
portfolio company so they don't have to count you as a loss. Answer to a board
of directors when you want to change a font color.

The rest of us, we'll still be here, slowly growing our existing profits,
spending nearly nothing, and making smart moves that grow our businesses
without excessive cap expenditures. And later, if we need it, the money will
be there. My Father told me something once that has stuck with me for many
years. Essentially: "Don't worry so much about money. There will always be
money and there will always be ways to make it, when you need it."

~~~
iseff
The irony? AFAIK TechCrunch hasn't taken any cash, and is profitable.

By this measure, TC is not well-suited to survive the downturn.

~~~
tdavis
Haha, I hadn't even considered that! Something tells me they will prove their
own "omg only tons of money will save you" thesis wrong... to the continued
detriment of us all.

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whacked_new
YOU CAN SAFELY SKIP THIS ARTICLE. (that's for those who came here to read
comments and decide whether to read the article). Accurate summary: economy is
down, money is scarce, hence startups with lots of funding will survive. Now,
look at our huge list of a hrefs!

A pointless article that just pulls down the standard of TC even lower than
what it has become. Who cares about the guys with millions and millions of VC?
How about an analysis of what kind of product is well-positioned for customers
with tight wallets?

Of course I'm not getting off the hook without supplying my own
interpretation. I'm bullish on something that decreases distance between
international netizens. Facebook? Sure, but they only tackle one facet of it.
There are lots of nontrivial, invisible, local-dependent barriers to get
around.

~~~
ojbyrne
"YOU CAN SAFELY SKIP THIS ARTICLE" probably applies to just about everything
on techcrunch.

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wheels
Seems kind of a shoddy list. It'd seem for those numbers to be meaningful
you'd also need to know their burn rate, how long they need to be profitable,
and what their valuations were from those funding rounds and what that might
mean for them if some of the exit opportunities start becoming scarcer.

That's been one of the more interesting things that I've thought through a
little -- what will the opportunities for exits look like in the upcoming
years? Will the big acquirers tighten their belts?

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SarahToton
What a load of crap. How much did pets.com have in their war chest back in the
day? How far did that get them?

Massive "startups" vs the small agile ones are like the dinosaurs vs the
rodents. Who survived and thrived after the meteor hit?

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ojbyrne
Yes, a sucky list, but it feels kind of good to see mahalo.com isn't there.

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profgubler
I agree. This list is pretty pointless. The companies that are most likely to
succeed in a down economy are those that solve actual problems for people.
These problems could be ways to save money, or otherwise. But, it has to be a
problem truly worth something to the consumer if it is solved. Because in a
down economy, consumers won't spend money on solving problems that are just
nice to have solved, instead of need to be solved.

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vaksel
if you raise $455 million I would hardly call you a startup

~~~
tdavis
Sure, you're just a start-up with a ton of expenses that hasn't figured out
how to make the revenue necessary to sustain without that kind of cash.

If it's not a "start-up", what is it? It sure as hell isn't an "established,
profitable business." It's not established because people are still willing to
invest 100s of millions of dollars based on a hope that it'll pay off huge
later and it's obviously not very profitable.

~~~
vaksel
Its just a business. You don't have to be profitable to be considered one.
Doesn't facebook has something like 700 employees at this point?

To me once you have revenues of 1mm per year, you are no longer a startup.

~~~
hugh
What if I have a 30-year-old restaurant with revenues of $900K?

I was wondering about the definition of "startup" the other day. Would it be
reasonable to define it in terms of profitability? Once you reach
profitability you have a proper, self-sustaining business; before that you're
in the much riskier position of being a start-up, burning through cash in the
hopes of becoming profitable later on. This would mean that things like
restaurants fall into the startup category only briefly, while (say) biotech
companies can be startups for a decade or more.

~~~
ericwaller
I think the term startup describes an unproven business.

You can have all the funding in the world, or have been operating for 10+
years, and it still may not be clear that you've got a viable business.

I do think it's important to distinguish between startups and growth
companies. Facebook is no longer a startup, it clearly (to me at least --
though I'm sure this will be contentious) is a viable business, all that extra
VC is about fueling mega-growth.

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netcan
Incredible!

The argument made is that these companies a recession proof because they don't
make any money?

In a bizarre way it makes sense. Can't affect your income if you don't have
any income. It'll be hard for newer startups to get funding (perhaps) so the
barrier to entry for competitors grows.

Works as long as they don't hit a wall before things recover.

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DanielBMarkham
Yes.

A credit crunch is great news. Big, established businesses can't raise huge
amounts of money to grow.

So small, flexible business raise little amounts in unusual and novel ways and
have room to grow.

Hey, I don't want this thing to blow up, but if it does, there is going to be
all kinds of bright sides, including the ability of people/firms with lots of
cash to start their own lending institutions.

