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by kposehn 5316 days ago
"if the EZ fails" - Ok, if it fails...

"there will be a liquidity crisis" - Ok, yes

"IPO runways will have to be extended" - Probably

"all seed to mid-stage startups will go bust over the next 8 months" - Wait, what? How did you arrive at this conclusion? By what do you infer this? Yes, liquidity may get crunched and runways may go long, but you've taken one set of results and taken it way past the likely outcome.

I do understand the thinking that cash may dwindle, but you're assuming far too much here.
1 comments
knowsnothing613 5316 days ago
seed funding usually provides an 18 month runway before more financing is needed. Mid stage runways are for a 2-5 years. You had a seed/angel funding bubble in 2010, so those companies are likely close to the end of their runways now, so they will need a cash influx. If there is a liquidity crisis, it'll be highly unlikely for them to get funding.

Also, they is still alot of inventory (mid stage web startups) from the 2007 funding bubble to work through.

Mid stage companies, funded in 2007, and had a 2-5 year runway, were waiting on the recent IPOs (Groupon, LinkedIn, Pandora, Zynga, ..) to raise appetite for their stock, but Groupon & LinkedIn, and Pandora IPOs are busts. So the capital markets will likely be closed off to them, and their will have to turn to the secondary markets. But once again, if there is a liquidity crisis, they will not get funding, and they will face a cash squeeze over the next 9-12months, depending on their burn rate.

So you have two web bubbles that will collapse, if the EZ fails. The 2007 funding bubble (digg, etc), and the 2010 angel funding bubble.

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drumdance 5316 days ago
It's possible, but difficult to predict. Back in 2008 Sequoia famously predicted startup capital would dry up, but it didn't come to pass. (http://venturebeat.com/2008/10/10/the-sequoia-rip-good-times...)

Of course, the rise of super angels probably played a large role in that.

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