[Jason] The Startup Death Spiral + Feedback from (The) Startup Depression

by Abhishek

———- Forwarded message ———-
From: Jason Calacanis <jason@calacanis.com>
Date: Sat, Oct 11, 2008 at 6:41 PM
Subject: [Jason] The Startup Death Spiral + Feedback from (The) Startup Depression
To: jason@binhost.com

Team Jason,

1. Right now I'm working on a piece about the "Startup Death Spiral"
and I'm looking for tips and stories from folks who lived through the
last dotcom boom. What specific things did you do–and what DIDN'T YOU
do but wish you did–last time the market came apart? Please keep each
tip concise and short (one to three sentences for each point).

2. Two weeks ago today I wrote "(The) Startup Depression" post, and since that time it's been picked up around the world. I thought I'd share some of the feedback we've gotten. If you know of any local language stories covering the email please send them to me.

best regards, Jason
(In London today, off to South Korea tomorrow)

A selection of feedback from "The Startup Depression"

New York Times:  "Credit Crisis Spreads a Pall Over Silicon Valley"
entrepreneurs, investors and executives now believe the question is
when, not if, the financial chaos will hurt the countryÕs cradle of

BusinessWeek: "What Will the Crisis Mean for Venture Capital?"
"Web entrepreneur Jason Calacanis wrote late last month that as many as 80% would go under in 18 months."

Financial Times: Start-ups seek the arms of old foes
"Reluctance to invest in an uncertain economic environment ravaged by
the global financial crisis could put start-ups out of business, warned
serial entrepreneur Jason Calacanis – a longstanding cheerleader for
the sector – in an e-mail urging entrepreneurs to prepare now."

BBC: "Technology – is the party over?
"Over the weekend, the tech community was circulating an e-mail from
Jason Calacanis, a noted web entrepreneur and blogger, who is predicting that the collapsing US economy will kill between 50 and 80% of start-ups over the next 18 months."


Times of London: "US meltdown sends chill through Silicon Valley"

"A blog post by influential entrepreneur Jason Calacanis set a new downbeat
tone when he predicted that the collapsing US economy would kill between 50
per cent and 80 per cent of start-ups over the next 18 months. Then tech
stocks, led by Apple, took a battering. They have failed to regain much

Scobleizer: "Anti-depression thinking: what do we do?"
all, we donÕt have the ability to ask Congress for a bailout. IÕd love
to see ideas for everyone thrown around here and weÕll sift through the
best ones. If you were a big-company executive, what would you do? What
if you were a startup CEO? A VC? A geek churning out code?"

Silicon Alley Insider: "Fred Wilson: My Thoughts On 'Startup Depression"
also on iStockAnalyst.com
do think Jason's missing one important point in his email. It's not the
venture backed startups that are going to struggle the most.  All
startups are going to have to batten down the hatches, get leaner, and
work to get profitable, but the venture backed startups are going to
get more time to get through this process than those that are not
venture backed."

VentureBeat: "How start-ups can navigate through the falling dominoes of the economic crisis"
valley needs another PayPal, which was one of the last pre-bust IPOs
that created a lot of millionaires with money to invest in the next
generation of start-ups. The Web 2.0 crowd revived Silicon Valley.  And
Web 2.0 was started by serial entrepreneurs, which included the
founders of Friendster, MySpace, Tribe, and the PayPal mafia."

Ted's Take: "Startup Depression"
couldnÕt agree more with all of his points as to why startups fail; the
meaning of happiness and finding a higher calling; and what startups
must do right now to stay in the game."

Cnet News:  "How start-ups can survive"
Schonfeld on TechCrunch points out how the credit crunch will lead to a
venture crunch, and Jason Calacanis' latest e-mail newsletter predicts
that "50-80 percent of the venture-backed start-ups currently operating
will shut down or go on life-support" within the next 18 months
(italics mine). Is it time to panic?"

The New York Observer: "The Startup Depression Arrives"
(Overview of Calacanis, Schonfeld, and Fred Wilson commentary, mostly quotes from all three)

Information Arbitrage: "Startup Depression?  Nah."
today's world you are either moving forward or moving backward – stasis
is not an option. Inertia is death. And it is at this intersection of
creativity, intensity, customer knowledge and cost efficiency where
start-ups can step into the breach. And they are."

Startup Spark: "Startup Depression?"
agree that things in the startup world will be drying up for a while,
so if you are in the midst of a startup, you need to be focused.
Everything you do needs to be analyzed for effectiveness in order to
survuve the slump thatÕs about to happen."

The Deal.com: "Metrics are Dave McClure's cure for startup depression"

are always important, but if you think credit is any tighter now than
it was two weeks ago — and it probably is — then metrics are one way
of showing to your investors that you have made some progress," says
Dave McClure (pictured), the former PayPal Inc. executive turned angel
Measuring and analyzing traffic to Web sites is especially
important for startups that lack revenue or are just beginning to get

The Deal.com: "Fred Wilson, Jason Calacanis write prescriptions for startup depression"
the Web 2.0 ashes, Calacanis' phoenix rose in the form of Weblogs Inc.,
sold to AOL for $25 million in 2005. These days he's running
Mahalo.com, which launched in May 2005, with backing from Sequoia
Capital, News Corp., CBS Corp, Burda Media and angel investors
including Wilson and PayPal Inc. founder Elon Musk.
Calacanis has
plenty of tough love for startup entrepreneurs today, including
recommending "firing anyone who is good or average.""

The Blog Herald:  "Calacanis Calls the Startup Depression, Still Not Blogging"
actual essay is from his mailinglist, which you can sign up for here.
If you already subscribe to JasonÕs emails, youÕve already read most of
this. However, the additional comments for the blog post is

Force of Good:  "Startup Depression Suppression"
entrepreneurs there is never time to be depressed.  There is always
time for realistic optimism, good business thought, and execution.  And
that is now you win in any market be it up or down"

ButtonALL Blog:  "If a Startup Depression is Coming, Open an Online Soup Kitchen"

the good news for us: Heck, weÕre already 4 dudes and a Rails box.  No
offices (except for our Starbucks board room), no stupid expenses, tiny
overheadÉ.All code, no filler.  Recession, Depression be damned.  Why
does history always repeat itself?  DidnÕt we learn anything from the
nineties.  Glowing aluminum signs, Aeron chairs, Killerspin ping pong
tablesÉ.Get mad.; Bootstrap!"

JP Adams – Entrepreneur:  "Jason Calacanis on (The) Startup Depression"
Calacanis is the guy in the tech start-up world who is best at talking
about the human side of the biz, a worthwhile topic to think about.

Social News:  "Talk Social News Episode 5: Yammer, Google Android G1,
using social media to explain the bailout bill and what Jason Calacanis
calls the Startup Depression"
(Podcast Episode)

http://talksocialnews.com/download-manager.php?id=5 (mp3 download link)

A More Perfect Market:  "Jason Calacanis and the Helplessness Vaccine"

"Fighting when you know you're going to lose. The stubborn refusal to admit helplessness. Immunity from despair and complacency.
It's a crazy thing to do, to fight when you know you'll lose, but it's not so crazy when you don't believe in losing."


Laughing Meme:  "Nostalgia"
thinking about it in the light of this weekÕs market silliness is
enough to make me want to go back to SxSW again this year (where the
torch was kept alight, like Ireland in the Dark Ages). And IÕd sworn
off it after this last year, but maybe budgets will be contracting
again by then. And those projects that got started out in the darkness,
say Flickr, and Upcoming and del.icio.us among others, wasnÕt it all
much better when the market got back involved and they got serious?"

Content Matters:  "How to Survive the Downturn"

you have a good business concept, I believe it's always a good time for
startups. Large companies will take a bunker mentality, reorganizing
and cutting costs in an effort to ride out the storm. But the period
coming out a downturn (which may be 18-24 months away) are where
significant marketplace change occur."

ZDNet Australia:  "Troubled times ahead for tech?"
Calacanis has made some dramatic predictions about start-ups
disappearing. He could be right: But then the start-up executives at
the Web 2.0 conference three weeks ago (just as the scope of the Wall
Street meltdown was becoming clear) who fell back on that "cautiously
optimistic" catchphrase could also be right."

Technosailor.com: "It's the Economy, Stupid"
humans are a people of patterns, after a few weeks of major drops on
the market, a pattern and a cognitive comfort level sets in. Investors
begin to see opportunities instead of challenges. Bargain buyers go
thrift shopping and a rebound begins. In my investment armchair,
I see the end in sight. We are not there. We are going to see lots more
before it turns up. But, my instinct tells me we are nearing a bottom.
That doesn't mean things turn around overnight."

/Message: "Jason Calacanis And Thomas Friedman On A Brand New Day"

could be that a huge die-off of start-ups might be a good thing, even
in the near term: although not necessarily for those working there. How
many social bookmarking apps do we need? Is there really a place for
seventeen social aggregators, or eleven blog comment plug-ins?"