High-Tech Startups Start to Hit the Skids

Thursday, 15 Nov 2012 07:45 AM

By Dan Weil

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Plenty of high-technology companies got off the ground in recent years, but many of them are now floundering.

Young companies start up with seed funding and then grow with Series A and Series B rounds of venture-capital funding.

Now many companies that made it through the Series A round are hitting the skids, Business Insider reports. The number of expansion-stage financings, which generally encompass the Series B round or later, have plummeted to 207 a quarter from 305 a quarter earlier this year, according to a National Venture Capital Association study.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

Some corporate founders are able to sell out to larger companies, generally receiving a job and stock options, but no cash.

Others aren’t so lucky. They have to shut down their companies and start their careers anew.

But on balance, the trend is positive for the high-tech industry, according to Business Insider’s Alyson Shontell.

That’s because many of the best and brightest were creating companies that made no sense.
“Now that the companies are starting to fail, the talent is being gobbled up by bigger, more established companies that need smart people to continue changing the world,” she writes.

But one sector might miss all the tech startups: real estate

“Whether it’s Silicon Alley in New York, Silicon Hills in Austin, Silicon Beach in L.A. or Silicon Valley in the Bay area, it’s the tech sector that’s driving office demand,” John Sikaitis of real estate services firm Jones Lang Lasalle tells Bloomberg.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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