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“Innovative companies that venture investors helped build in recent years now find they can’t go public and it’s much harder to sell out in an acquisition. Only one venture backed company went public in the last two quarters, and the value of mergers and acquisitions fell 55% to $10.6 billion.”

Read Spencer E. Ante’s article, “Sweating through an IPO drought,” on BusinessWeek.

“The average angel deal in the first half of 2008 was about $540,000, up 8% from the same period in 2007 (…) With the number of active angels jumping 10% in 2007, to 258,200, you might think relief is on the way. But the amount invested last year rose just 1.8%, to $26 billion (…) the pursuit of angel dollars will only get tougher.”

Read Amy Barrett’s article, “Angel investors get picky,” on BusinessWeek.

Admittedly, my optimism is being put to the test. The Economist claims that economic liberty is suffering. Capitalism is at bay due to growing state intervention to prevent the economic recession to become a depression. We are still experiencing an economic roller coaster characterized by unpredictable market volatility and no clear end in sight.

This morning, the news is that policy makers are working on a second stimulus plan. Bernake, the chief of the U.S. central bank (the Federal Reserve)  supports the need for further action, but he has not yet made official whether the economy is in an actual recession. For all that matters, that might just be a technicality and everyone is making contingency plans anyway.

Back in July, start ups had access to funding and, generally speaking, investors focused on long term opportunities. However, there were no venture IPOs in the second quarter of this year in the U.S. which was unheard since 1978. Spencer’s article talks about Gajus V. Worthington, Fluidigm’s CEO, who just withdrew the firm’s IPO plan in light of investors’ severely diminished risk taking.

Even though Fluidigm’s revenues are growing, the company could run out of money in about a year.  Chances are, quite a few startups in weaker situations will go belly up in 2009. Moira Herbst’s “The coming pink slip epidemic” is talking about widespread layoffs in every industry with the exception of health care and energy. Some venture capital firms  are downsizing their own staff while asking startups to streamline costs to put it mildly.

Tech spending is clearly slowing down. However, Forrester reports a strong demand for enterprise software, mostly related solutions helping improve operations and lower costs.  IDC points to opportunities driven by the insatiable need for data storage, as well as data center consolidation, virtualization, mobile devices, data mining and business intelligence tools. eWeek’s article on the IT budgets for 2009 makes a very interesting reading.

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José de Francisco López
Chicago, IL     21 Oct 08