Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

The Largest Risk in Silicon Valley is Taking No Risk - Why the Economic Downturn Will Spawn Hundreds of Startups

Posted by Tom Foremski - October 6, 2008

Hundreds of new startups are likely as a result of the economic crisis and a rise in unemployment among software engineers. The simple reason is that unemployed software engineers will have the time to band together to work on new projects.

That's exactly where blogging software such as Six Apart's Movable Type came from, Flickr, Delicious, and many other successful startups. They were all born in economically bleak times.

Today it doesn't take any capital to launch a "Web 2.0" startup. You don't need to own a server, you just need a couple or four developers, a good idea, and a friendly local coffee shop with free wifi.

People's layoff packages can easily support a six month development runway, and by the end of six months, the economic conditions will have likely improved. In six months time it will also be easier to get financing from angel investors to expand a promising startup.

It's worth the risk. In Silicon Valley the largest risk you take is by taking no risk at all.

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