Monday, September 29, 2008

Will Wall Street Crash burn Silicon Alley?

How will Silicon Alley (and Silicon Valley) fare in this new era of Fear and Loathing on Wall Street? Today, TechCrunch chimes in with a positive report:
So far the downward spiral of credit and financial markets seems to have left venture capital firms and startups relatively unharmed. Even though the IPO market closed completely in the second quarter (and opened again only slightly in the third), venture capital firms continue to raise money and invest in startups at a healthy pace. During the first half of the year, venture capital firms raised about $16 billion in 141 funds and invested about $15 billion in nearly 2,000 deals.

But, there are different views on the subject. Case in point: The Calacanis Nation enewsletter, put out by my old friend Jason, a real expert on crash and burn. (When his Silicon Alley Reporter featured the Alley Meltdown some years ago, he put a photo of the Hindenburg on the cover of his magazine, something I'll never forget as I watched my roster of Alley PR clients disappear virtually overnight).

Jason predicts that 80% of all startups (East and West Coast) will be out of business within the next year or so, as VC $ dries up. He cites three factors that kill startups: 1) bad idea, 2) bad execution 3) other outside reasons. Well, clearly, No. 3 is the big one to watch right now. A great startup can have the right idea, the right execution and still get ****** in today's business environment. Let's hope Arrington is right, and Jason is wrong. But, my bet is on my old Alley buddy, who saw boom and bust and boom again over the past years.

No comments: