Without the support of the venture capital world, the tech startup space wouldn’t be, well...it would be. At least not as large and active as it has shown to be in the past several years. So it likely comes as somewhat grim news for small nests of coders around Silicon Valley and much further reaches that the VC world took a little (and we mean little) dive in Q1 2008, as a MoneyTree report by PricewaterhouseCoopers and the National Venture Capital Association has now shown. Startups may fear that a rockier road to growth is to come.
Does this really mean the broader economic recession inflicting the US, as well as other nations around the globe, is going to drag the tech world in for a prolonged mud bath (not the good kind). Probably. Will things bounce back? Of course. Meanwhile, coders are still creating stuff, and investors need to invest in stuff - otherwise they cannot continue to see grand returns from IPOs, buyouts and the like. So, naturally, the question for financiers now is where to put their cash in order to make the best of a fairly bad moment for global banking and investing.
Now, being a cautious optimist, I find there’s some good news in this decline in VC activity, which is that the folks with the green are simply going to have to spend smarter to ensure they keep growing at a steady clip. This means funding startups that are really worth tossing stacks of cash.
For a number of years now, more so in ’06 and ’07 than past seasons, investors have taken a more liberal tack than a conservative outlook. Though the bubble of recent quarters has been one more intelligently managed than the mayhem of the late ‘90s, it was nonetheless a balloon which did have at least some chance to go very bad for the tech industry. The free markets are never 100% secure, after all. So, the fact that VCs have toned down their bullish attitude - a change that seems to me mostly to be the result of the broader recession, rather than any substantial decline in activity in startup creation - offers a chance for the industry at large to focus more on quality than quantity. And let’s face it, there’s been a good deal of how-many-companies-have-been-funded-today going on for quite some time. Such an environment can remain stable for only so long. The tech world should be so fortunate as to be reminded by the general economic woes of the present day that parties can only last so long as people are able to produce things that warrant such eager spending.