There is a high probability that we are in for a recession and many folks think that it might be a fairly severe one. What does that mean for startups and VC funding? VentureBeat today has an article suggesting that funding is slowing down both from VCs and angel investors. For startups that are already well funded this is great news because they can focus on building their product / service and worry less about the markets becoming overly crowded with me-too competitors. The same argument applies to startups that don’t have the money in the bank but are backed by VCs who will continue to fund them (to that end it helps to have funds that are deeply reserved and are committed). Unlike the collapse of the bubble I don’t believe this means that startups without revenues but rapidly growing services will get washed out. The reason is that we now have a proven monetization system and that we can build and operate the services at much lower cost. So backers willingness to fund these businesses through a down turn is likely to be much higher (it also helps to remember the spoils that went to those who continued to build after the bubble burst). Tomorrow I will post on what it means if you are just getting started or thinking about getting started.
