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Tech Start Ups And The Economys Best Hope

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by Kevin Maney
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Oct 09 2008 2:48pm EDT

Tech Start-ups and the Economy's Best Hope

Kevin Maney writes: Silicon Valley has never been a place where people throw in the towel. The dot-com crash of 2000 didn't drain the life out of the tech start-up culture -- in fact, it probably helped by injecting a dose of realism and weeding out dumb ideas and pretenders who had no business starting anything. And thank God for that, because in the years after 9/11, technology from start-ups and innovations from existing companies like Apple helped pull the country back to life.


So now, in the wake of the financial crisis, news reports say venture capital investment is falling off - which, at first, looks mighty worrisome. Is investment money going to dry up, leading to a drop in tech start-ups and a dearth of companies to help the U.S. rebound? Not necessarily.

VCs are important to Silicon Valley, but they're not the only source of money for start-ups anymore. The cost of starting a tech company has dropped precipitously, thanks to cheaper/better/faster technology. A company that five years ago cost $1 million to launch now might cost $100,000. And that makes it easier for angel investors -- wealthy individuals -- to fund companies. Marc Andreessen and his business partner Ben Horowitz have been steadily funding about a start-up a month. It's also easier than ever for a few ambitious technologists to pool their own resources and start a tech company on a shoestring.

Nonetheless, the country needs to make sure money is there to start companies and build new technologies. My colleague David Ewing Duncan wrote an important piece about this. OK, we need to pump $700 billion into the financial sector so there's an economy that's even functioning. But that's just fixing what's broke. As David points out, just a sliver of that amount would go a long way toward creating the companies and breakthroughs that will renew the nation.

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