OT: What does the Crunch mean for Australasian Startups?

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What a week.  The worst week on the Dow ever.  Following that we have seen multiple alerts from VC’s out to their investments to batten down the hatches, cut burn, maximize revenues and prepare for a bumpy ride.  The underlying message that is being put out though by the US VC community, is that things can be ok if you act now and get prepared.  Such examples of these messages are here, here, here, here  .

I have been thinking about how this translates to us down here in Australia and New Zealand.  Obviously the financial crisis is having a global impact, which we saw last week with the nose dive of the ASX.  While the entire economy is slumping, how does this flow through to the Tech sector, and in particular the new tech or startup scene?

An obvious key down side is that investors locally mimic investors globally, so overall available funding sources will decrease.  But getting funding here has always been tough and not too many revenueless business models have been given life downunder.  But sound ideas with proven innovation, and sound business models continue to attract investment.

A positive side of the situation is that globally the landscape has become more competitive for Australasian based startups.  “Be small enough not to fail” is the mantra being recited over in the valley, meaning that the startups on high burn rates should cut costs and staff and downsize to a more sustainable version of themselves.  If we look at the characteristics of many Australasian startups we see that for most this has always been the normal way of life.  Funding has always been much tighter, and proportionally more ventures have been self funded.  I don’t have stats but I would suspect that a large proportion of IT startups would remain in the 3-5 people range in their first 12 months.  During a boom this low flow of funds is prohibitive, not necessarily because the core innovation isn’t competitive but rather they are restrained on everything else that goes with launching a new technology.  This includes things like global marketing, building global alliances, doing big deals with major players, acquiring complimentary technologies etc. 

But in the current climate you have a good head start as you know how to operate in such conditions.  This is what you do; launch successful ventures on a shoestring and you have been doing so for a long time.  So while there is a lot of doom and gloom about globally, remember that the landscape has just become more competitive for you and maybe still is a good time to be involved in a technology startup based in Australasia.