

Sorry, Startups: Party's Over - sdfx
http://www.alleyinsider.com/2008/10/vcs-angels-to-startups-look-out-for-that-meteor-that-just-hit-you-

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shafqat
I call bullshit on all of this doom and gloom for startups.

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!

~~~
vaksel
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

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cstejerean
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.

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vaksel
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.

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tdavidson
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.

~~~
josefresco
Exactly, see startups focusing on new energy, frugal living and international
markets.

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hugh
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.

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swombat
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.

~~~
fallentimes
Haha likewise and I indirectly sell discretionary goods.

It's already becoming a self fulfilling prophecy. I think that's why Cuban is
buying.

~~~
kingkongrevenge
Cuban was talking about a market correction to oversold conditions, not at all
about an impending economic rebound.

~~~
fallentimes
Understood. But the doom & gloom message isn't just affecting stock markets.

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sfamiliar
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?

~~~
josefresco
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.

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chaostheory
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?

~~~
timr
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.)

~~~
chaostheory
I get bullish when everyone is freaking out, and I get worried when everyone
is euphoric

~~~
timr
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.

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josefresco
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.

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alecco
Worst case, Facebook can get a juicy contract with NSA ;)

~~~
alphamule
another one?

~~~
prospero
Facebook has funding from the venture capital arm of the CIA. I'm not aware of
any (public) connection to the NSA.

