MassTLC unConference Serves Startups Economic Reality Check

Participated in the MassTLC unConference as a sponsored entrepreneur last Thursday (thanks Bill Warner) and came away with the impression that the Boston startup community is still thriving despite the continuing downturn in the economy. However, money is apparently going to be a much scarcer resource for startups in the coming year.

I was partially at the unConference just to see what other ideas were being kicked around Boston by early-stage companies like Istobe and partially to see just what the climate is for funding these days. I came away with the notion that both VC’s and angels alike will be sitting on the sidelines more and more in the coming year.

Don Dodge was there. And even though he blogged in xConomy and on his own site about the billions in VC money around the Boston area, it sure seemed if those billions will be locked down for a while. One prominent VC told me that his fund planned to reduce its funding of new businesses by 50% in the coming year. The idea is that the best entrepreneurs and/or startup ideas will weather the bad economy and will still need investment a year from now at a lower investment price. That is, the VC’s will get more company for their money at a later time. So why not let the market weed out the bad stuff for them and when entrepreneurs are desperate for a cash infusion, the VC establishment will be there.

Angels, on the other hand, will be reticent investors for a different reason: their individual wealth is…well…less wealth than it was last month. Angels are really just individual investors that form a collective. So it makes perfect sense that a wealthy person who is only about 62% as wealthy as before will be less inclined to risk more of his/her money in the near-term.

So where does that leave companies like Istobe? Well, the truth is: we don’t need a cash infusion to survive. We’re a cash business, meaning that we don’t need vast sums of money to build our product out and our main metric is dollars, not pageviews. Bottom line: we don’t have to figure out to monetize our offering. But the dry-up of funding does leave us in a lurch when it comes to market penetration. After all, our competition is well-funded and will be using much of that funding to acquire customers.

In my next post, I’ll talk about some of the interesting products and services just now on the rise that I saw at the unConference.

Tags: Boston entrepreneurship, MassTLC, unConference

This entry was posted on Monday, October 6th, 2008 at 1:20 pm and is filed under Economic Downturn. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.