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WSJ: Startups Will Keep Struggling in 2010

In an article published yesterday (Start-Ups Will Keep Struggling in 2010), the Wall Street Journal reported that startup funding will remain tough to find in 2010.

The major problems:

  • Most entrepreneurs use personal savings or contributions from friends and family, but personal wealth – often tied to the value of homes or stock portfolios – has not bounced back from the economic downturn.
  • For both conventional bank loans and those insured by the Small Business Administration, entrepreneurs most show (a) that they have invested a significant amount of their own money and (b) solid cash-flow projections.
  • During the first half of 2009, the total value of angel investments fell 30% compared to 2008; 2010 is expected to continue at the 2009 level.
  • While venture capitalists are continuing to invest, they typically have been protecting later-stage companies already in their portfolios rather than funding startups.

The minor bits of good news:

  • While angels are investing less per deal, the total number of deals increased during the first half of 2009 over 2008.
  • Stimulus-related measures may increase SBA loans from 1% of all small-business lending to between 5% and 10%.

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Categories
Financing, Startup

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