The recession comes to Silicon Valley

Silicon Valley, which has remained largely impervious to the economic downturn, is starting to feel the strain--and open-source companies may not fare any better.

It was just a matter of time. Silicon Valley, which has remained largely impervious to the increasingly global economic downturn, is starting to feel the strain, according to The New York Times. It's not that housing prices are in freefall (they're not) or that people are being laid off en masse (they're not), but rather that the exit opportunities have largely dried up. According to the Times:

During the first three months of the year, only five companies backed by venture capital investors went public on Wall Street...That is down from 31 in the fourth quarter of last year, and is roughly the same level as at the nadir of the dot-com bust.

There was also a sharp falloff in the acquisition of start-up companies by bigger corporations...There were only 56 acquisitions in the first three months of the year, down from 83 in the fourth quarter.

With those options increasingly off the table, investors must spend money and time nurturing--or altogether salvaging--existing companies rather than building new ones.

I guess Oracle has already acquired everybody. :-)

Open-source investments are at an all-time high, but let's not kid ourselves. Open-source companies may be better suited to thrive in a down market, but their stockholders still want exits.

Perhaps this just means that open-source companies will need to take longer to grow their businesses. Perhaps it means that we'll see a few crack $100 million without being acquired.

Regardless, I can't help but feel that much as I like winning, I'd prefer that all software companies were doing well right now, both in their businesses and in their exits. The software industry will be a drag if all we can eke out is a few exits per year.

Tech Culture
About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.


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