Tuesday, December 16, 2008

Good time or bad time for startups?

I was reading some of Michael Arrington's posts from the Le Web conference and this post triggered a question in my mind - is now a good time or bad time for startups?

Arrington makes this statement:

But Europe’s persistent background pessimism was out in full force, even at an event full of entrepreneurs. Americans dominated the stage and spoke mostly about the tremendous opportunities that arise in down markets. Engineers are much easier to hire. The press have fewer startups and stories to divide their attention. The pond certainly gets smaller, but there are far fewer people fishing, too. For most startups, this is a time to blossom.
Hmmm, as a European (but one based in Dublin, Ireland which tends to mean I have a split US/Euro perspective on things) I can see where he is coming from but can also see some of the downside.

Yes, it is true that there are tremendous opportunities in a down market and engineers are easier to hire (but I'll come back to this point in a minute), and press coverage is probably easier to get. However, if you are well funded and can ride out this down market it's a great time. If you are in the position of raising new money either to get started or for follow-on funding then you won't have an easy time. Doom and gloom persists in the world of finance. Forget trying to get a loan.

On the question of Engineers. Any talented engineers already employed somewhere are unlikely to make a move to a startup unless it has serious funding behind it. Granted, there are many seriously talented engineers on the market because of this downturn so they should be easier to hire and probably for reasonable packages (but don't try to underpay because as soon as the market picks up they will jump ship).

So, the opportunities for startups in this market are most likely related to their funding situation. Well funded = good times; Poorly funded = bad times.