Josh Stein, managing director at Draper Fisher Jurvetson, echoes what many other venture capitalists have said about how the current financial meltdown will affect startups. He expects VC-backed companies to struggle in securing follow-on capital, while saying that those with proven business models and that are executing on their business plan will benefit from the proverbial flight to quality.
"If you raise that first round of capital, you have to demonstrate that you have a product that people want and will pay for," says Stein,
who specializes in wireless
communications, consumer services, and software infrastructure and applications, and whose board duties at DFJ include
Box.net,
Eventful,
IZEA,
Personiva,
Polaris Wireless,
SugarCRM, ViVOTech and
Yardbarker. "People are taking less things on face value than they were six months ago."
In contrast to those who few the financial crisis as potential debacle for the tech industry, Stein views the situation as "healthy" and a matter of survival of the fittest. "Entrepreneurialism is a Darwinian process," he says. "For natural selection to work you have to have stress in the environment to force companies to change and adapt. Too much capital is at least as damaging as too little because the companies aren't forced to become lean and mean."
Like other VCs, however, Stein believes that good entrepreneurs will always find ways to raise money, noting Eventful's $10 million funding
round last week.
-- David ShabelmanSee Oct. 15 post on Eventful's funding from Tech Confidential
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