Startup soothsayer Paul Graham is telling technology startups to get frugal with their cash. In the wake of the poor performance of Facebook’s IPO, new and early-stage companies may find it difficult to raise money or may be forced to do so at lower valuations, the influential co-founder of the Y Combinator startup incubator predicts. “The best solution is not to need money,” he wrote in a blog post, which was reportedly also sent in an email to his portfolio companies.
Already, the Facebook IPO has damaged the market for more developed companies planning to go public soon. But Graham’s words hint at broader implications for the entire startup ecosystem. Silicon Valley watchers have long-debated when or if a tech bubble would pop.
Maybe there won’t be a loud pop. But perhaps a less dramatic deflation is in the cards?