LA Times On Web Funding Slowdown
April 7th, 2008 by Benjamin KuoThe Los Angeles times just posted a piece speculating that more Web start-ups are on the rocks as investors are becoming more cautious.
The problem is, it’s very difficult to figure out if a company is having problems raising cash because the economy, or because investors are just not interested in their company. It’s much like the argument on Ivy League college graduates: does going to an Ivy League school make you smarter, or is being smart make it more likely you’ll go to an Ivy League school?
Is your company having funding because investors are pulling back on their investments, or are you having problems with funding because investors aren’t interested in your company to begin with?
Like many publicly traded companies who often use a “bad economy” as a convenient blame for a bad quarter–even though it was due to a management screwup– you’ll hear some venture investors tell you they’re just passing on your company because of the economy — “not your company, it’s nothing personal.” Just like they’ll also use the excuse that you’ve “got a great company, but it just doesn’t fit our profile,” or “this is a great idea, and we’ll get back to you.” It just goes with the territory — more startups fail to find funding than startups who do.
Does that mean there’s no impact of the economy on startups? No. There will be, and there will be harsh impact on some startups. But, unfortunately, so many companies — on a normal, even ultra bubbly day — can’t find funding, you can’t call a technology downturn using how many companies fail to find venture funding.
