12.19.02
There’s No Success Like Failure
One of the unwritten laws of economics is that whatever goes down must come up, eventually. So it was with interest that we heard several leading venture capitalists present their outlooks for the year ahead.
On our end, we’ve seen anecdotal evidence that enterprises are finally signing the dotted line for projects previously stalled in the pipeline over the past 12 – 18 months. And we’re seeing companies, like Oracle, actually beating the street in their latest earnings reports.
Undoubtedly, the last 12 – 18 months have been pretty quiet for VCs, at least for those that survived the dot com carnage. The VC speakers mentioned several technologies — mostly consumer-oriented — that they believe will take off next year, such as WiFi and digital photography-related services. It’s no surprise that enterprise customers are more preoccupied with consolidating their IT investments, not venturing out on limbs for new technology bets. Significantly, the VCs regarded web services as investment areas for existing IT vendors, not themselves.
When we asked the VCs to compare today’s conditions with past recessions, their answer was surprising. The current scenario more closely resembles the early 80s, when similar VC bloodbaths occurred after failed bets on disk drive and related hardware technologies. By contrast, the early 90s recession proved relatively tame, because VC numbers had not rebounded — so there was less money for less firms to lose.
So who will get funding during the next go-round? Chances are, it will be prospects that have already fallen on their faces, because VCs value experience — and, most importantly the ability to finish something that you have already started. Which proves that in the venture world, if at first you don’t succeed, those VCs left standing would be more than happy if you try, tried again.