Webconomy Down Oppurtunity Rising


It seems as though another round of dot com  blowouts are beginning.  The first high profile trouble of the economic crisis began with yahoo.  We saw Pownce bite the dust as well.  I am sure many other internet based companies and websites have collapsed, and I am betting many more will follow.

The Shakedown

Right now the credit markets have dried up, and new less established companies are having issues getting the funding they need.  That means that either they find a cheap or free way to run their company or they must close down.  So, the majority choose to close down. Many of these companies are closing before they even get off the ground.  The companies that are trying to cut margins and stay open are most likely going to get murdered by the competition with more money.  People like Microsoft and Google are going to eat their lunch.  In most efficient markets we see dozens of competitors in one field, eventually get narrowed down to two or three.  The economic recession is going to dramatically speed this process up.

No News is Bad News

The credit crunch is already showing up on the web, with the extreme lack of tech news.  A once thriving micro journalism industry is now becoming increasingly stale.  Even the news that is coming out is really hum drum kind of stuff.  The tech community also hasn't seen many new web sites or services launch.  This will continue to be a trend for the next year and a half to two years.  I have personally been getting extremely bored on the internet.  The lack of great tech news has motivated me to search out original content on the web.  I have dumped things like TWIT, Gizmodo, and Lifehacker for content like You Look Nice Today, photography, Jason Calacanis Newsletter, and my own content creation.  I expect many people will follow the same pattern of leaving content that repackages material for completely original content.  Tell the New York Times to cross it's collective fingers.

VC's Need to Take Some Chances

The main reason that new companies aren't launching is because of the venture capitalists.  They are the primary funding for most tech startups and they are not handing out money the same way they used to.  For the most part I believe that their strategy is good.  I also think they are going to end up taking that strategy way too far and missing out on a lot of opportunities to make money.  Basically, when VC's don't lend money they don't make any money.  When tons of VC's are lending money it makes it harder for each VC to make money because there is so much competition in the market place, and a VC only gets their investment returned when the company they are funding does well.  The first VC who is ready to start taking risks again will be the first VC to make some major dough.  If the company they choose to fund is innovative and they fund it properly, no one will be able to stop that company, because there will be no competition.  I expect the VC's will be back to normal in the next year or two, but until then there are some major opportunities for those willing to take risks.

Basement Web Developers

If you are a basement web developer, a one man show so to speak , now is the time to go ahead with that idea.  You probably won't get any VC funding to make a massive company, but you may be able to build your company from the ground up. Around the time the VC's are starting to invest again, you will be looking like a mighty fine investment.  There are many other perks to starting a web service or web site right now.  There are not very many good tech news stories, so the reporters will really be fishing for anything they can find.  Your tiny tech startup might just be what they are looking for.  The same will be true with avid internet users.  They will get tired of tinkering with the services they have now and will go off looking for new and exciting things.   Finally, if you work for yourself you probably won't get laid off, like a lot of other tech workers are now.

While it may seem that Rome is burning, remember that after the fire there will be lots of empty lots available on which to build.  The wise techie will see this period of time as an opportunity.  The wise VC will be looking for those wise ones with a product worth investing in.

Written By Jon

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1 Response to Webconomy Down Oppurtunity Rising

January 17, 2009 at 10:34 AM

It sounds like the thing to do is:
1. Look for people slashing prices trying to sell an item you want (the used markets or foreclosure markets, maybe even police auctions) and then buy it for super cheap. This could go from small things like keyboards, office chairs, coffee makers, desks, routers, servers, etc; all the way up to big things, like Yahoo.com
2. If you have been sitting on funds, find a startup with a business model that makes sense to you (don't go for "kinda get it", go for "I totally get it).
3. Start your day checking on your high value projects, ignore everything else in favor of your star. (It's possible this is just your 8to5 job).
4. Jason Calicanis talked about taking this time in a down market to build value and work on yourself, that sounds like good advice too.

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