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Or so the leading bloggers from the venture capital, silicon valley, and entrepreneurial worlds are screaming today. By the looks of Techmeme’s front page this morning, the tech startup world was hit by a bomb last night.
Based on a quick read, it looks like the VC world is telling the Startup world, "Strap in. It’s going to be a bumpy ride." According to Om Malik, Sequoia Capital held a meeting yesterday for the top executives from all its portfolio companies. The basic message was:
"things could get a lot worse than people think, and it will be a more protracted downturn…They want the companies to cut costs, to figure out way to survive and emerge at the other end of this downturn, which could last years. The speakers went through each functional area of the business and told the companies how to cut costs. By holding this special meeting, Sequoia is telling its companies to put survival strategies in place and figure out ways to outlast the broader market troubles."
According to Michael Arrrington of TechCrunch, one of Silicon Valley’s best known angel investors, Ron Conway, sent a similarly grim announcement to his portfolio companies.
But, Kara Swisher of All Things D, tries to put all the VC Doom and Gloom in perspective.
Is it just me or does the sudden prospect of venture capitalists–the very investors who fueled the Web 2.0 valuation insanity with their typically egregious overfunding of start-ups–lecturing about the bleak economy and the need to tighten belts seem just a tad ironic?
It’s kind of like Washington politicians who handed out-of-control bankers one deregulation after another in exchange for campaign donations now mounting their high horses and decrying Wall Street greed in the current economic meltdown.
And yet, just like that, Silicon Valley’s investors–who could spin you all the way to next Sunday about how Facebook was actually worth $15 billion, despite not having much revenue quite yet–are turning into penny-pinching accountant types.
Based on some short discussions with VC friends, this is really the equivalent of making kids in Drivers Ed watch "Mechanized Death," Wheels of Tragedy," "The Last Prom," and other works from Highway Safety Films. While scaring actual children may have gone out of pedagogical fashion, it appears that scaring the bejeezus out of the young, impressionable tech entrepreneur set has not. During the boom times mistakes in execution and management are easily masked, but during the busts…well, that’s when the fundamentals are so important.
In the coming weeks, we’re going to take a look at what Congress is doing/looking to do in the current financial crisis and how it will affect the world of tech startups.