the pendulum past the apex
By now we’ve all read the wise opinions of Henry, Jason and Fred on how the current global financial woes affect the industry. Overall sense: “negatively” with hope. None of them seem to see this as another end-of-days, and after having experienced the bubble, we can all say that this doesn’t really resemble that.
Right now, the pendulum is slowing down as it approaches its apex. The past four years have been a real renaissance in high tech – out of the grim downturn days sprung handfuls of tiny, efficient, productive startups that were quickly doing great work in all segments of the industry. This period was defined by the survivors – people who had energy and commitment and really good ideas to drive their tiny business out of their garage and into the (V)alley.
Those core survivors built businesses that everyone knows by name these days. Sometimes they failed and joined up with their friends and succeeded. But it was the success stories we all wanted to hear. It was those successes that encouraged so many others to create their own startups. And so it began. The pendulum crossed the middle line, and via the law of diminishing returns, we ended up with a handful of extremely successful startups being purchased by big businesses, which put dollar signs in the eyes of anyone with a computer and a dream.
Often, this brought tech folks out of New York’s big businesses on Wall St and Madison Ave, and encouraged them to jump into the micro- and small-business world. I can’t imagine what the ratio is, but I’m sure there is some percentage of those folks that, after having tasted the freedom of small business and self employment, would never go back to big industry. This is a great thing, I’ll come back to it…
The industry has been totally flooded with startups of every ilk, all of them vying for desk space, developers, and techcrunch articles. Most of them are totally pointless. Some of them are useful. A few of them are really amazing. I would agree that this doesn’t amount to a bubble. Unlike the mortgage industry right now, these startups aren’t built on fake money. The money actually exists, and the little that is overinflated won’t bring down the entire industry.
While the mortgage industry doesn’t have a direct effect on high-tech, high-tech will be impacted just like everyone else. It will be more difficult for companies to operate, particularly in expensive towns like NY where business loans are helpful in starting and growing a business. There is a silver lining to this: Attrition.
This ebb to the tide of startups will reduce the number of startups, but won’t reduce (by much) other resources necessary in the startup market: affordable office space, development personnel, media attention. There has been a developer crisis in New York for more than a year now, where it seems that there is less than one highly qualified developer for each startup in the city. Perhaps now, with fewer startups snatching up small-business-minded developers, there will be enough to go around (provided Google’s latest expansion doesn’t snatch them up with the promise of security and small-business feel).