So, what happened to that funding freeze?
Here's one from the counterintuitive files, boys and girls. The economy is in an awful rut but some tech start-ups are still raising money. What gives?
With financial markets melting down amid predictions of a deep recession around the world, the conventional wisdom is that funding for tech start-ups is in a deep freeze.
But sometimes the conventional wisdom overstates the reality. The economy's in an awful rut but some tech start-ups are still raising money. Just in the last couple of weeks, there's been a rush of funding announcements hitting the transom. Of course, that news has been overshadowed because of the obvious attention being paid to the market's volatility. But consider the following:
• Mail.com Media got $35 million in funding.
• BillShrinkraised $8 million in a Series B round.
• Industrial Origami finished a third round--this time for $17 million.
• Wide Orbit secured $10 million.
• Trusteer gets a $6 million Series B round.
• Bain Capital invested an undisclosed amount in Blip.TV.
And then Thursday, former SAP exec Shai Agassi secured a dealwith AGL Energy and Macquarie Capital Group to raise $665 million to build an electric-car infrastructure in Australia.
I don't want to sugarcoat this. The IPO market is moribund and there still are a lot of layoff announcements in techdom--but this is one from the counterintuitive files. What's more, even as layoff announcements grab the headlines, many tech firms still say they are hiring. Yes, hiring!
How, then, to explain the apparent contradiction? First, check out the conversation I had earlier in the day with my CNET colleague Rafe Needleman, Webware's editor in chief.
A couple of points to consider.
Even during severe downturns, new technology development never grinds to a complete halt. As Rafe suggests, the question boils down to whether a company can remain sufficiently lean to outlast the hard times. It helps if it's not under pressure to turn an immediate profit. If, as expected, the economy can return to something approximating normalcy within the next couple of years, history will repeat itself and another generation of tech start-ups should emerge from this squall in fine fettle.
Of course, if the nimrods in Washington mishandle the recession and it turns into a full-bore depression, then we'll all be commiserating on the bread lines before long.