This week I attended the Web 2.0 Expo New York, on behalf of ReadWriteWeb. Summing up 4 days of conference with all the amazing conversations is pretty hard. So before the conference, as I was walking to the Javits Center, I decided I wanted to come away with three things:
– One big negative impact of the market mayhem on the start-up world.
– One big positive impact of the market mayhem on the start-up world.
– One trend that seemed to be everywhere.
In other words, like Twitter and 37 Signals, I was deliberately reducing, cutting out, eliminating, restricting to ONE thing in each case. So here goes…
One big negative impact of the market mayhem on the start-up world – angel investors run for the hills. It’s natural. They have had their personal wealth impacted. They are not diversified like a VC, it is their own money. They have no compulsion to “put money to work”. This is a superb opportunity for VC funds with the courage to step into the breach. But that may not happen, probably won’t happen, so this will almost certainly mean that many fewer start-ups will get funded in the next year or so.
One big positive impact of the market mayhem on the start-up world – this is like the Boston area when DEC and Wang imploded. Thousands of really smart people were left without a paycheck. Many of them started great companies. You heard this vividly at the Conference. The phrase “refugee” was common as in “I am Bear Stearns refugee”. And then they went on to pitch their start-up. You cannot possibly say it feels good now, there were some bruised people walking around, but it may well be that we will look back on this moment as the genuine transformational moment in the New York start-up economy. Did I mention that I am an optimist?
The one trend that seemed to be everywhere – a focus on near term revenue. There were exceptions, of two types: firstly, the fortunate entrepreneur who had closed a big enough “fund me through the downturn round” and, sadly, a few ostriches with their heads in the sand.
The ones I enjoyed meeting were the “true grit entrepreneurs” who had hustled their way to profitability over many years. They will do great. In the last downturn in 2002, one VC remarked to me that they were only interested in two types of venture. One had been started well before the boom – that makes the ideal birth date today in the 2001 to 2003 era, perhaps 2004. The other was something starting up right now as everything was imploding. Everything in the middle was likely to be riddled with overoptimistic assumptions, expectations of instant wealth without effort. That means start-ups born from 2005 to 2007 had better either have enough capital to sustain their burn for a couple of years, or are profitable or very nearly so.
Oh and one final takeaway. The food at Javits is awful and expensive. You have to walk a few blocks, but on the corner of 38th and Ninth is a really good Italian restaurant and it’s really not much more expensive than the Javits chow. Cannot remember the name but 3 blocks west on 38th and you are there. How is that for useful advice on ReadWriteWeb?
