Search:
Recent Posts
Categories
Archives
Economic downturn = judgement day for Web 2.0
I was wondering when it would all end for Web 2.0. Well the end has arrived. It’s 2000 all over again, but this time the nuke is pointed right at venture-backed, pageview-obsessed, ad-centric content plays. I just got an email from Jason Calacanis and its dead on. He states:
It’s my believe that the economic downturn will be much worse than it is today, and 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.
Make a list of every Web 2.0 startup to raise an A or B round and cross 80% of them off the list, because they will not make it to their next round of funding or profitability.
Now, I could be totally wrong. No one can guess or time the markets perfectly. However, planning for the worst is a virtuous idea, so I encourage you to read on.
Everyone I talk to is feeling confused, paralyzed and anxious–many are in full-blown depression. People are scared, and they should be. This could be the start of a very difficult time for our country and the rest of the world.
He’s right on. If you’re in an ad driven, Web 2.0 business then you’re probably done for for two reasons:
- Ad dollars are about to dry up with marketing budgets.
- VC dollars are about to dry up. Where do you think VC’s get their money? Most of it comes from Wall Street banks, hedge funds, and high net worth individuals. Game over.
If you’re in eCommerce then its a little better. Your business will slow down only as much as retail purchasing trends slow down. People still buy stuff even in recessions, and the better the deal the better business will be.
- Execute better (you should already be doing this)
- Grow talent you have (you should already be doing this)
- Fire average people (don’t hire them in the first place)
- Cut spending everywhere you can (you should already be doing this)
- Find a revenue stream and ride it (that’s ground breaking stuff and hard for Web 2.0 people to comprehend)
- Focus on profitable clients (no kidding - do it anyway)
- Make your top ten 10% better (yes)
- Hold an optional, off-site breakfast meeting on Sunday and see who shows up - that tells you who is dedicated and who isn’t (this is stupid but its how people in CA think)
- Build market share (no kidding)
- Raise money (is there any left?)
I know MBA school is joke to some Web 2.0 types, but how about coming up with a real idea that has a real revenue model and adds real value? Wow, what a concept!
More and more I am convinced that success in business comes down to these three things:
- Build a process (not a business) around quality lead + closer + high margin product and you will achieve success.
- You must always be moving forward. If you have too many days where you take two steps back instead of two steps forward then you’re done (think execution)!
- You must find a way to measure and track results and then you must improve on those results. You really can’t know if you’re taking two steps forward if you’re not tracking results.
Have a nice weekend.
I’m not saying it’s going to be a picnic, but I really do feel like since the valley (and the alley, as my case is) is less dependent on wall street, only people needing new funding will have problems, or at least that’s my hope. Companies looking to exit in the next 6 months, and companies looking to raise another round in the next 6 months will have the biggest problems, imo. Companies (like mine, naturally) who just stocked the shelves should be able to ride out the worst of it. (famous last words.)
Left by Randall on 09/28/2008@Randall:
I hope you are right and I wish you the best of luck but I don’t think people really understand how dependent the valley is on Wall Street. I think that will be apparent in this downturn.
Left by Chris Knudsen on 09/28/2008