I started noticing an interesting trend happening in the software/web marketplace as of the start of this year. Companies would begin announcing major rounds of funding well beyond the average for that given round. Companies who come to mind that received big rounds are ning (44Million), linkedin (53Million), rockyou (35Million), slide(50Million), facebook (300Million) obviously, and several others. I remember when Ning picked up their round, Marc Andressen went on record to say that he doesn’t need the 50mm nor does he plan to use that money to spurt any sort of abnormal growth – instead he said that ning is proven and here to stay and this money is to ensure we can weather any sort of storm that may hit over the next several years.
By nuclear winter, I think he means whatever shakeout this market may experience from the nationwide financial crisis or the bursting of the web 2.0 bubble. So candidates working for these companies have to be wearing a nice sized grin on their face knowing they are working for a company with clear strength and sustainability.
On the flip side, this past week, I’ve spoken with a number of candidates who have expressed concern over whether or not their company will be able to raise the necessary funding to stay in business. I am sure that some of these companies will pull through and raise the funding they need to continue, many will simply go out of business or stay flat in maintenance mode. Neither of which is a good place for an ambitious a-level candidate.
It’s clear that what we’re experiencing now is the beginning of the shakeout from the current web 2.0 bubble. I know there have been a bunch of reports published lately about VC’s funding fewer and fewer companies. I think what’s starting to happen is the VC’s are placing bigger bets on the companies they believe have the staying power necessary to grow into successful businesses or realize a successful exit. And the companies that they are on the fence about and who would have easily seen funding a few years ago, now are being passed on. Just like after the shakeout of the web 1.0 bubble the few players left standing were ebay, amazon, yahoo, shopping.com, cnet and several others, I think the companies raising these large rounds will prove to be around in the years to come.
What’s different about this bubble as compared to the last one is that towards the end of the last bubble, it seemed that the industry had hit an innovation wall in terms of what kinds of business can be built on the web. It’s as if people were out of ideas for a few years. Now it seems that even though some of the weaker companies will get shaken out of the market, there is so much innovation left to be done that we’re not even close to hitting another wall in our marketplace.
That’s why now its important for anybody working for a company take a moment to evaluate whether your current employer falls into the camp of the have’s or the have-nots. If they are a have-not, blow the dust of that resume and start looking.
And when you are considering a job change, it’s very important that you not only evaluate the role, team and culture, it’s equally important that you evaluate the sustainability of the company by looking at indicators like financial health and business sustainability to ensure you are working for a company with the highest likelihood of making it.
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