Web Companies May Be Bracing For Recession
I had my next few purchases all planned out – a nice alarm clock, a new TV, and a big bookcase. Then signs of a recession began to pile on, and setting aside extra mortgage payments started to seem like the better idea. Many companies are thinking similarly.
Did you notice the flow of funds a while back? Even as unnerving economic indicators pointed in another direction, it might have been easy to interpret the money’s presence as a good thing – a continuation of business as usual, or even better, an upturn. But that interpretation might have been wrong.
In the middle of an economic downturn, VCs can’t be counted upon to throw money at struggling operations or experimental ideas. Also, to be fair, they might not even share cash with solid companies. So, well, behold the stockpiling.
Eric Eldon writes, "Out of 379 IT-related funding rounds that happened in the fourth quarter of 2007, 129 were for web companies, according to Dow Jones VentureSource. From total of $3.7 billion in investments, nearly $1.1 billion went to these web companies. ‘It’s pretty impressive for that little [industry] segment’, Dow Jones’ Adam Wade tells me, noting that there have been more than 300 rounds raised already in January, a good portion of which have been web deals."
We’re not necessarily screwed, though; although an hour’s data is hardly indicative of a long-term trend, the Dow and Nasdaq are both up about 0.3 percent so far today.