Sign up FAST! Login

The Screams of Crushed Startups Echo Across Silicon Valley

Stashed in: @bhorowitz

To save this post, select a stash from drop-down menu or type in a new one:

The problem is particularly pronounced among companies trying to graduate beyond funding raised from less sophisticated, increasingly generous angel investors and into the world of venture capital funds. The growing difficulty of that leap, known as the “Series A crunch,” has been a hot topic in Silicon Valley for months now, but many financiers hoped the problem would self-correct as more early-stage starups failed — and more angel investors got burned. But that self correction hasn’t happened yet.

Indeed, the problem only seems to be growing. Ben Horowitz, founding partner at Valley VC shop Andreessen Horowitz, addressed the issue on Fortune’s website yesterday, comparing startup founders to the captain of the Titanic, warning them that the funding environment could change “radically,” and advising those burning through cash — i.e., most startups — to “swallow your pride, face reality, and raise money even if it hurts.” That means raising money at a lower valuation in a “down round.”

This has been going on for at least a year.

If it has finally been reported in the news, that may mean we've turned a corner.

Example was Sequoia's RIP Good Times speech in 2008.

The next year Sequoia funded a grilled cheese company. No joke. 

Poor Path has to raise at a valuation of only $500 million.

I weep for them.

Ben Horowitz's blog post is descriptive not prescriptive:

Only one thing a startup can do.

Survive. - PandaWhale

You May Also Like: