The financial crisis will have its impact on early stage companies. Companies with fragile and unproven business models (online advertising), high capital expenditures, relatively young markets (mobile apps) will find it difficult to secure financing from business angels and vc’s. Actually, I think that vc’s will not invest in new companies, they will keep their cash at hand, focus on their existing portfolio companies and support that instead of looking for new companies.
The earlier you are in your development phase, the better. Once your business needs to prove its commercial skills or needs to find an exit, you’re in trouble.
SEED stage: Those companies which still need to close their seed round will have difficulties as they still need to prove their product/service and business. If they have an interesting technology that needs tuning and further development, it might be easier. Eventually, a critical element for investors will be the “entrepreneur” and the “team”. There must be a proven management team behind if it where to convince investors from making a first bet on it. The advantage is that most of these companies are not commercially viable, i.e. they still need to work hard on product development. The current economic recession, is just the right moment to focus on development.
Series A: If you’ve already closed a round, then you’re kind of safe. You might have a fragile business model (online advertising), or are active in a young market (mobile apps), you’ll probably get the support from your investors. As your investors won’t take, or will be careful in taking on more investments. They’ll probably focus on your company and see how you can manage getting through this rough period. Bootstrapping will of course be elementary.
Series B, C, D: There is no market for exits, because an exit is going IPO (who wants to do that now?) or via a trade sale that requires transactions with leverage from banks and or exchanges of shares which are worth less every day. Thus later stage companies will have to focus on “bootstrapping”, no more hiring, no free services and trying to get through the recession period.