Oregonstartups.com Blog

Key Dates

Oct 20, GOSCON
Oct 21, SAO: Startup Exchange
Oct 21, AeA: What to do when you Saturate your Market
Oct 22, SAO: When to Hire/ Who to Hire
Oct 23, OEN Swap Meet
Oct 30, OEN: Venture Northwest
Nov 13, Ignite Portland
Dec 08, Northwest Environmental Conference

Monday, Oct 20 2008
9:00 AM, GOSCON
9:00 AM, CubeSpace Morning Meeting: Legal
11:30 AM, eWomen: Interview wtih Marilyn Carlson Nelson
5:30 PM, BEC Corvallis After Hours

Tuesday, Oct 21 2008
7:00 AM, IMC: Creating a Publishing Strategy
8:00 AM, SWHRMA: Annual Legislative Conference
9:00 AM, GOSCON
9:00 AM, CubeSpace Morning Meetings: IT
10:00 AM, OEN: Building Brands via Social Media
4:00 PM, PMI chapter meeting
4:00 PM, SAO: Startup Exchange
5:30 PM, AeA: What to do when you Saturate your Market
5:30 PM, IMA dinner meeting
5:30 PM, PDXfX: Food and Wine

Wednesday, Oct 22 2008
7:30 AM, SAO: When to Hire/ Who to Hire
9:00 AM, GOSCON
9:00 AM, CubeSpace Morning Meeting: Finance/Operations
5:30 PM, SAO Poker Night

Thursday, Oct 23 2008
7:00 AM, OHF: 6th Annual nsurance CEO Roundtable
7:30 AM, AeA: Going Green
7:30 AM, PMF: Improving Collaboration in Multi-ethnic Teams
8:00 AM, PNDC: Increasing Cash Flow for your Business
9:00 AM, GOSCON
9:00 AM, CubeSpace Morning Meetings: HR
11:45 AM, PRSA: Tips, Tools and Tactics
5:00 PM, OEN Swap Meet
5:30 PM, AeA CEO Forum

Friday, Oct 24 2008
9:00 AM, Cubespace morning meeting: Marketing
9:00 AM, SAO: Niche Recruiting
4:00 PM, Beer and Blog

Saturday, Oct 25 2008
10:00 AM, Calagator Code Sprint

Sunday, Oct 26 2008
1:00 PM, Dorkbot PDX

I’ve seen numerous postings on why down times can be a good time to start a company (for example: a Paul Graham post). Along those lines, the keynote address given by Rich Karlgaard, Publisher of Forbes magazine, at the Bend Venture Conference on Friday made some interesting points. And he had some other interesting thoughts to share also. Here are some notes (hopefully others will fill in more details and/or make corrections in the comments!)

• He argued that the single most important aspect of business one needs to understand today is the speed with which change is accelerating. The 5-year probability that a leading firm (a firm in the top 20% of a market, measured by revenue) will fall out of the top 20% over a 5 year period has been shrinking (according to consulting firm McKenzie). In particular, the number of leading firms falling out of the top 20% were:
  • from 1975 to 1980: 7%
  • in the mid 1990′s: 20%
  • today: 30%

  That’s quite an acceleration! Good news for entrepreneurs, and cause for concern among the established players.

• Karlgaard believes that today’s economic downturn is similar to the 1973-1975 downturn.
  • Across that entire decade, stocks increased only 17%. And there was a 49% capital gain tax. Taking inflation and taxes into account, the stock market was a real loser.
  • The electorate was very dissatisfied with both Congress and the president (like today…)
• But in spite of the 70s being so bad, there were a lot of companies started that decade that grew into major players. A few examples:
  • Federal Express
  • Microsoft
  • Genentech
  • Apple
  • Oracle
• Why were the 1970s so good for entrepreneurship?
  • The bad economy drove bright people “underground”. With the economy on the skids, there were few attractive, fast growing, highly rewarding industries to attract the best and the brightest. Just finding a job could be tough. So the best and brightest started companies.
• Because broadband access is so available today, smaller communities (Bend was the example) can successfully attract entrepreneurial companies today, as long as they provide:
  • Good educational infrastructure (K-12 and a university, or at least junior college)
  • Quality of life
  • Low crime
  • Access to bank credit
• A mistake some economic development organizations make today: focusing on bringing in jobs by attracting an operation of an established company, rather than focusing on supporting entrepreneurs and entrepreneurial efforts. Attracting a high-tech manufacturing plant will create some jobs, but most of the career-growth opportunities in those companies are out of the area. On the other hand, by helping entrepreneurs grow companies, a city creates a much more vibrant and infectious energy that gets the entire community pumped up with the attitude “hey – this kind of success story can happen here!” That’s much more likely to lead to more entrepreneurial efforts, more economic growth, and more jobs.

From Silicon Alley Insider Startup Advice: Worry, But Don’t Panic – You’ll Miss The Opportunities John Borthwick, who heads up the Betaworks incubator/’business acceleration platform’ (investments in Twitter, Tumblr, someecards, etc.) sent out a memo to his portfolio companies recently about startups and the downturn. Most of his advice applies equally well to good times as well as bad. But there are some good pointers for for startups coping with today’s challenging environment.

This past week, Jason Calacanis made a post titled (The) Startup Depression which suggested that:

It’s my believe that the economic downturn will be much worse than it
is today, and that 50-80% of the venture-backed startups currently
operating will shut down or go on life-support (i.e. 3-4 folks working
on them) within the next 18 months.

Jason goes on to list 10 steps a startup should take to navigate these troubled waters. Those steps are worth reading.

Fred Wilson of Union Squares Ventures posted a thoughtful response, claiming that although the current turbulent times will be difficult for all startups, the venture backed startups will “get more time to get through this process than those that are not venture backed”. The central argument:

Venture capital firms will get more conservative and they will urge their portfolio companies to do everything Jason suggests (and more), but they will also be there with additional capital infusions when and if the companies are making good progress toward a growing profitable business.

On the other hand, Fred is much more pessimistic for companies that are seeking seed-level venture capital.

…in down market cycles, it’s the seed and startup stage investing that dries up first. It happens every time. Seed/startup investing is most profitable early in a venture cycle and late stage investing is most profitable late in a venture cycle.

and

There’s another important reason why seed and startup investing dries up in down cycles. Venture firms don’t need to spend as much time on their existing portfolio companies when things are going well. A rising market hides a lot of problems. But when things go south, they tend to become inwardly focused. I believe we are headed into a period where venture firms will spend more time on their existing portfolio and less time adding new names to it.

It’s time for all of us to batten the hatches.

I missed the Sep. 26 Oregonian article on the Sanyo solar factory until this weekend. 

State officials welcomed a Japanese company’s announcement Friday that it will build a solar factory in Salem, while acknowledging that Oregon taxpayers could end up paying half the plant’s $80 million cost.

Based on expectations of this creating 200 jobs, Richard Reed of The Oregonian did the math and came up with the subsidy being worth more than $200,000 for each job created.  I suppose with the indirect economic benefits, the return on investment could turn out OK — but $200,000 per job is impressive.

If only I could figure out how to get $200,000 for every job we help create at OTBC.   Maybe it’s time to re-brand as clean-tech!

From Red Herring Silicon Valley Goes Dry, both IPOs and acquisitions were way down in the third quarter of 2008::

Venture capital exits through initial public offerings and mergers and acquisitions plunged 66 percent in the third quarter to $4.6 billion, according to Dow Jones VentureSource, which called the IPO environment the worst on record.
…
Dow Jones tallied 66 M&A deals worth $4.4 billion in the quarter. For the first three quarters, Dow Jones reckoned there were seven U.S. IPOs that raised $551 million, putting 2008 to be the worst year on record.

And to add to the doom and gloom:

As with other segments of the economy, the global credit crisis is casting a dark shadow over venture-backed companies. Though limited partners typically enter long-term financing agreements, the collapse of IPO and M&A markets mean they won’t be repaid as quickly. That means VCs won’t have funding to finance new companies or to add follow-on rounds for current companies. VC fundraising also could be far more difficult in coming years as investors pull away from risky investments.

And last but not least:

VC fundraising also could be far more difficult in coming years as investors pull away from risky investments.

OK, I realize that venture capital investments are risky. But the current chaos in the financial markets makes it clear that there were a lot of risky investments out there. We just didn’t know how risky they were. At least with a startup investment, the risk is apparent up front. If only that were true in the world of investment banking.