The sky is falling--or at least slipping a little. The days of wine, roses and bouquets of venture capital dollars for tech companies are a thing of the past as the economy continues its dive. Investments are drying up, layoffs are prevalent and startups are getting frugal. But not all is doom and gloom. While some speculate that Silicon Valley has the potential to experience the next Wall Street-like meltdown, serious startups are out to prove smart tech companies can and will survive.
"I really do believe that great companies are built in difficult environments where others are on their heels and sitting on their hands," says Chris Albinson, managing director of Silicon Valley investment firm Panorama Capital.
Cloud computing startup Egnyte in Mountain View, Calif. had the fortunate timing of closing its first funding round in July after bootstrapping the company since its founding in 2006. CEO Vineet Jain was already seeing a slowdown in tech investments that had only gotten worse since the summer.
"VC firms are not giving out cash, but they're supporting current investments," Jain says. "If you're a new company looking for funding, it's going to be much more difficult."
Egnyte's lean approach--with outsourced engineers and a six-person core employee group--has paid off in solid prospects for the business. Other companies are turning to Egnyte's cloud computing solutions to save money.
"Tech is going to be hit hard, but 2009 could be a fairly good year for us," Jain says.
Funds Still Available
Investment funds may have tightened, but they haven't completely dropped off. Deborah Magid, director of software strategy with IBM Venture Capital Group, has been keeping a close eye on the market.
"[Venture capitalists] will continue to invest. They're just being more cautious and they're looking for deals that reduce risk," she says.