Jason Calacanis is a survivor, and offers up some tough love for entrepreneurs who are shell shocked by the financial events of the last few weeks, on top of the chilling in start-up funding that has been worsening for some months now. He starts with a pronouncement:
It’s my believe that the economic downturn will be much worse than it is today, and that 50-80% of the venture-backed startups currently operating will shut down or go on life-support (i.e. 3-4 folks working on them) within the next 18 months.
Make a list of every Web 2.0 startup to raise an A or B round and cross 80% of them off the list, because they will not make it to their next round of funding or profitability.
It could be that a huge die-off of start-ups might be a good thing, even in the near term: although not necessarily for those working there. How many social bookmarking apps do we need? Is there really a place for seventeen social aggregators, or eleven blog comment plug-ins? Attention to hard numbers and real growth rates might lead hopeful entrepreneurs and investors to get smart fast and drop experiments that aren’t working, and to go back and dream something up that is really innovative instead of just-another-fill-in-the-blank application.
On the other hand, Jason provides good advice for the CEO of one of these beleaguered start-ups: trim expenses, push execution hard, find streams of revenue and swim up them, and attract on the best and brightest.
I won’t even argue Jason’s basic premise – that things are going to get much, much worse – because things almost certainly will. Not necessarily in the next few weeks, or even months, but the basic structure of the world and US economy is really headed in the wrong direction. Burgeoning growth in India, China, Brazil, and other emerging economies almost guarantee increased demand for and use of fossil fuels with a commensurate rise in their price and their side-effects, especially global warming and other forms of pollution. America is involved in cowboy-on-holiday adventures in Iraq and Afghanistan that will ultimately cost trillions. The American dream has been hijacked and turned into a nightmare, where we will soon see the hollowing out of exurbia as foreclosures mount (even in the case of the most widely spread bailout, foreclosures will continue), and many will find it increasingly difficult to maintain a middle class standard of existence.
There is almost no doubt that whoever inherits the Presidency will have to work very hard indeed to even evert just the worst of these trends, and that blunting all of them will probably not be possible, at least not for years to come.
If there is a light at the end of this deep, dark tunnel it may be our opportunity – forced upon us by circumstances – to dramatically remake the world, and to make it batter. Thomas Friedman, writing about the bailout in today’s New York Times makes the case that we need to invest in the future, not just clean up the drunken brawl that smashed Wall Street to bits:
We need a buildup. We need to get back to making stuff, based on real engineering not just financial engineering. We need to get back to a world where people are able to realize the American Dream — a house with a yard — because they have built something with their hands, not because they got a “liar loan” from an underregulated bank with no money down and nothing to pay for two years. The American Dream is an aspiration, not an entitlement.
Indeed, when this bailout is over, we need the next president — this one is wasted — to launch an E.T., energy technology, revolution with the same urgency as this bailout. Otherwise, all we will have done is bought ourselves a respite, but not a future. The exciting thing about the energy technology revolution is that it spans the whole economy — from green-collar construction jobs to high-tech solar panel designing jobs. It could lift so many boats.
In a green economy, we would rely less on credit from foreigners “and more on creativity from Americans,” argued Van Jones, president of Green for All, and author of the forthcoming “The Green Collar Economy.” “It’s time to stop borrowing and start building. America’s No. 1 resource is not oil or mortgages. Our No. 1 resource is our people. Let’s put people back to work — retrofitting and repowering America. … You can’t base a national economy on credit cards. But you can base it on solar panels, wind turbines, smart biofuels and a massive program to weatherize every building and home in America.”
I think we will see a lot of the smartest entrepreneurs moving into green technologies, where the heat is going to be for the next generation. And I have started to see a trend in a new flavor of web companies – where the web meets green – that demonstrates some of the untapped areas for innovation that Friedman and Jones are arguing for.
There is a revolution in the works, and the spark for that often comes from deep despair when dreams are smashed by events. Jason relates his darkest hour – the fall of Silicon Valley Insider, the .com bust leading some detractors to call him as a charlatan instead of visionary, and then 9/11 when his firefighter brother might have died – and found that there was a light at the end of his tunnel, and that led to his started Weblogs.inc, a really new sort of media company.
But perhaps now the green fields might not be media, but the actually development of green technologies and web solutions to tie that into our everyday lives. We need to move into a new tomorrow, and innovators and entrepreneurs still have a big role to play.