There has been lots of hand wringing this week in the start-up community over the US financial crisis. (for example, here and here and here). The discussion was fueled in large part by a post by Jason Calacanis in which he states that “50-80% of the venture-backed startups currently operating will shut down or go on life-support (i.e. 3-4 folks working on them) within the next 18 months.”
Although I found this claim a bit Chicken-little’ish (even in booming economic times the failure rate on start-ups is very high), I really like the advice Jason gives in his post. Namely, that you should stay lean, and focus relentlessly on your business model without being afraid to quickly adapt in your effort to build a great company. There are lots of similarities between Jason’s tips and the way Brian and I have operated in our past start-ups. In particular, I couldn’t agree more when Jason writes: “If you’re idea is wrong, it really doesn’t matter. What matters is if the original ideas allows you to evolve into your big idea.”
The only problem I have with the post is that Jason seems to suggest that being a lean, focused, rapidly innovative company is required because of the economic downturn, which infers that crappy ideas and bad execution can actually lead to success in times of economic prosperity. You bring up some great points Jason, but they should apply regardless of the macro-economic climate in which we find ourselves.
The financial meltdown hasn’t impacted Alice significantly (knock on wood). We are pleased to be wrapping up a large angel round of investment for Alice.com right now. Although the fund raising has been more difficult because of the financial market meltdown, we are still going to close our round as planned and obtain the capital we need to execute. What’s more, Brian and I have met with several potential VC partners in the past few weeks that are still very active in funding new ventures.
My takeaway is that the future is still bright for start-ups that have a good idea and a good team to execute on that idea. Let’s hope it stays that way, and that trying economic times like these makes us all better at bringing innovation to market regardless of what is happenning in the stock market.