How Dare You Talk About a Tech Start-Up Die-Off!
It's good to stir up the mind-meltingly boring world of tech news. Which is why we enjoyed today's Wall Street Journal article, suggesting an impending tech start-up die-off. The cold breath of death on their neck has raised tech insiders' hackles.
The Journal article—"Web Start-Ups Hit Cash Crunch"—argues that the flood of hackneyed start-ups into the ever expanding tech bubble is unsustainable. Pointless tech companies that were given millions of dollars in funding are now having a hard time raising more money. No shit?
As the number of tiny Web companies riding the frenzy has mushroomed, some in recent weeks have found it tough to procure new funding, investors and entrepreneurs say.
That is pushing some entrepreneurs to look for "bridge" financing to keep forging ahead, or to cut the valuations they are seeking, the people add.
Looks like the savvy tech investors of our new digital gold rush—luminaries like Justin Bieber and Ashton Kutcher—will only invest in three or four Groupon clones.
"There are a lot of seed-funded companies that are starting to seek out new capital, but there just aren't enough venture capitalists to fund them," one venture capitalist told the Journal. "There's going to be a culling." dun dun dunnnn.
Judging from Twitter, this article hurt a lot of venture capitalists' and start-up founders' feelings. (TechCrunch has a good round-up.) Because, if you ask them, they have been expertly allocating funds to valuable start-ups in a perfect Darwinian marketplace. Only the strong survive..
"Our portfolio companies have all been able to finance themselves when they have wanted to," wrote New York VC Fred Wilson. "And we have made more investments this year than any year we've been in business."
How can there be too many start-ups? For every grilled cheese sandwich that gets $10 million in venture funding, another five are cast into the gutter.
