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As vc’s head for cellar, startups should head for garage!

April 2, 2008

VentureBeat is reporting, what many of you have been thinking, “venture investors are heading for cellars, as larger economic problems loom.“  Dean Takahashi explains,

http://earthscience.files.wordpress.com/2007/05/tornado.jpgLast fall’s housing slowdown has led to turmoil among Wall Street banks. Private equity firms can’t borrow as much money to hatch their takeovers. Stock market have dropped, with the Nasdaq off 15 percent since the start of the year. Since public companies are under the gun they aren’t buying.  Successful venture exits are becoming scarce. Yesterday, the National Venture Capital Association reported the first quarter saw only five venture-backed initial public offerings worth $282.73 million, down dramatically from 31 IPOs worth $3.04 billion in the fourth quarter. Mergers and acquisitions are also on the decline, with just 56 in the first quarter compared to 83 in the fourth quarter.

If you can ‘bootstrap’ your startup over the next 12-24 months you are going to be in the catbird seat when your local venture capitalist peaks his head out of the cellar.  My thesis is that it is times like these that create the best startups.  There won’t be funny money awash in the market making it almost impossible to figure out which startups are built to last and which are built to fail.  Entrepreneurs should be excited to realize they will have fewer competitors and they won’t have to waste their time ‘waiting’ to raise venture capital.  Instead they can just get to work - start building.  Chaos is an entrepreneur’s best friend - embrace it!

Written by Alexander Muse · Filed Under Blog, Startups 

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