The Economy and Entrepreneurs – Hold On!
Mar 17 2008

Unless you live under a rock or don’t drive a car, you have no doubt heard about or felt the state of the US economy.  It’s in a state of well let’s say ‘confusion’ with indications it’s moving in the wrong direction.  Gas prices are at record highs, people are filing for bankruptcy, they are losing their homes, the government has a record amount of debt, the stock market is going down, etc. etc.

So where does this leave us entrepreneurs who want to raise funds to take their businesses to the next level?  Well, that’s a good question and a challenging one to answer.

I’ve had a handful of meetings with potential investors and a couple of them have expressed interest in participating, but they might change their minds given what’s going on in the economy.  As the saying goes “It’s not in the bank, until it’s in the bank!”  Fred Wilson, a venture capitalist in NYC, linked in his Read the Blogs post to a post on the Bear Stearns bailout by JP Morgan, which illustrates why even if you think it’s in the bank, it might not actually really be in the bank!  Our personal savings accounts are also going down with the market.

I had several conversations with entrepreneurs coming from different parts of the country at SXSW Interactive who have been struggling for a while to raise funds for businesses that are up and running with strong visitor and user traction.

So despite only being less than two months into the process, all of this has forced me to revaluate my fundraising plans for Babble Soft.  Entrepreneurship is not for the faint of heart as there are many ups, downs, and false starts.  The economy changes however have a huge impact on the success or failure of a startup.  If the economy is doing great you get all sorts of crazy new ideas/businesses popping up with chances to live and prove themselves.  If it’s bad, even the companies with wonderful ideas can suffer, die out, or never even get a chance to shine.

The good news is that of all the industries out there (except for maybe the alcohol industry), the baby market is fairly recession proof.   People don’t stop having babies nor do they stop buying things for their babies or things to help them take care of their babies.  The bad news is that what we are trying to do at Babble Soft does not yet have a predefined “mental need or want” (because it’s so new) like say bouncy chairs, bright/shiny toys, Baby Einstein videos, or diapers.

On the plus side, we have not taken any outside money to date so we don’t have to worry about how and when we pay investors back like some other start-up companies.  The downside is that if we don’t raise money right now, it will take longer to bring the exciting, potentially life changing vision I have to the world or worse we might miss the market opportunity.

I’m still trying to figure out the best plan of action.  I wish we had more money to create a new user experience, enhance our current applications, and create new applications ourselves.  I’m evaluating trying to raise a smaller amount of money and growing slower.  Now’s the time when the creative juices start flowing!

If you know an entrepreneur, give them a hug (if you can’t give ‘em money) because it’s going to be a tough roller coaster ride for the next probably year or so.  Some will be able to hang on and emerge stronger and better, some will get off gracefully, others might fall off unexpectedly, and yet others will wish they had fallen off before they lost their money and lost some of their sanity. 🙂

If any of you have any thoughts, advice, virtual hugs, or even questions please share below…

Author: Aruni | Filed under: babble soft, entrepreneur, entrepreneurship, fundraising, venture capital | Tags: , bankruptcy, bear stearns, entrepreneur, entrepreneurship, fred wilson, fundraising, investors, record gas prices, stock market, us economy | 6 Comments »

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