There is more optimism in Silicon Valley these days as a modest rebound in venture funding hints that the tech sector may be a leading indicator of economic recovery.
Mercury News reports that Bay Area start-ups landed nearly 50 percent of venture capital dollars in the last quarter, with clean-tech companies raking in the largest funding deals.
The article quotes several CEOs from companies backed by Sequoia Capital. They were among the portfolio companies spooked by Sequoia’s now-famous “R.I.P. the Good Times” slide presentation in early 2008, that strongly urged start-ups to cut back on expenses and get their business house in order.
The CEOs – from Cast Iron Systems, Ruckus Wireless, and Appirio — successfully navigated the recession and managed to strengthen their companies during the downturn. Ken Comee of Cast Iron Systems said Sequoia took some heat for creating such alarm, which led to big job cuts, but that it was the correct thing to do. “Some companies acted a little too late, or didn’t cut deeply enough, and then had to cut again,” he said. By heeding Sequoia’s warning early, these companies had already trimmed their workforce sufficiently when the worst of the recession hit. They were able to ride out the storm and have even been able to inject further capital and staff up on venture capital professionals this year, as the economy picked up.
The recession has accelerated two technology trends. Fast growth areas include online gaming and “virtual” goods, as consumers seek low-cost entertainment options. In addition, the use of “cloud computing” continues to provide a viable alternative to businesses trying to control their enterprise software costs. Cast Iron Systems is of the emerging firms that is seeking to exploit cloud computing.
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