The sound of the bubble popping was Silicon Valley. The recent market drop has shut the IPO market, at least for a while, until investors figure out whether the weak markets are a prelude to a double-dip recession or just another hiccup in the slow recovery.
What does this mean for entrepreneurs and startups?
- Back to bottomline business. Startups need to validate their business models by finding paying customers and generating cash flow. Business concepts and revenues-without-profits will no longer attract VCs, M&As or IPOs. You have to create a real business for a change.
- The IPO shutdown is an opportunity for sales and marketing people who can find customers and generate revenues fast. So expect to see fewer engineers being hired and more sales, marketing and business development folks.
- Many entrepreneurs planning on entering the U.S. will wait longer to build their businesses at home and possibly even bypass the U.S. to find easier, faster growth markets nearby. For European ventures, Turkey is one of the largest economies with solid growth prospects. For Japanese and Asian ventures, the old Four Tigers (Taiwan, South Korea, Singapore and Hong Kong) are the best prospects, with Vietnam, Malaysia, Indonesia, India, and China a bit tougher for small ventures to enter. Also, it’s often easier to raise money in Hong Kong than Silicon Valley.
I think this market slowdown is a useful correction for Silicon Valley, which was getting too frothy for my tastes. Enthusiasm and greed were overshadowing common sense, hard work and prudence. But in the mid term, this “bump in the road” will prevent Silicon Valley from going off the cliff again.