Google's $100 million (£68m) move into venture capital ought to give heart to those technology start-ups opening their doors onto a world in financial crisis.
In a blog post announcing its arrival on the scene, Google Ventures managing partners Rich Milner and Bill Maris spelled it out: 'Economically, times are tough, but great ideas come when they will,' they wrote. 'We think the current downturn is an ideal time to invest in nascent companies that have the chance to be the next big thing'.
The key criterion for hopeful start-ups, Milner and Maris add, is evidence of 'truly awesome potential', and they are right - a recession should be no bar to awesomeness. Technology and media companies including Microsoft (launched in the recession of 1973 to 1975), MTV (1980 to 1982), Hewlett Packard (the Great Depression of 1929 to 1939) and IBM (the Long Depression of 1873 to 1896) all demonstrate the principle that a sound business can transcend the climate into which it is born.
Successful launches in the aftermath of the dotcom crash of 2000 include Wikipedia, Last.fm and Apple's iPod. Another name that originated in those dark days is LinkedIn, and the professional networking site recently unveiled research indicating that, if they were made redundant, 49 per cent of its networked professionals would use the windfall to launch their own start-up.
"We absolutely believe that when the market shifts significantly - which is an understatement of what we have got going on right now - big opportunities come out of that," says Kevin Eyres, European managing director of LinkedIn.
"Office space is cheap, all the start-up costs you typically have are much lower right now, and there are a lot of very, very talented people who are either out of work or who want to take their destiny into their own hands."
It is easy to get carried away with the idea of bucking the downward trend and shifting the paradigm, and getting carried away with such things is a large part of what we depend on entrepreneurs to do. But a note of caution needs to be sounded.
Last year, a study in the US found that fewer companies launch during tough economic times and that companies established during those periods are more likely to fail than firms founded in more prosperous times. But then again, if it was going to be easy, everyone would be doing it. Here are five of the hottest digital companies starting up in this downturn.
Aroxo
Aroxo launched just a few weeks ago after two years in development. By now, founders Matt Rogers and Andrew Culpan will know whether or not its concept - an online retail marketplace in which buyers set their desired price for an item and plugged-in retailers can either pass, take the price or negotiate - met with instant success.
The site was named the UK's Hottest Start-up 2009 at the London Business School Technology Summit in February, so it is clearly doing something right. It aggregates dealers of consumer electronics, home appliances, kitchen goods and other categories. Buyers key in what they are willing to pay for a given item from an inventory of around 1,000 products. For guidance, their bid is informally rated on a thermometer of feasibility - from 'A Fast Deal' down to 'You'll Be Lucky!' - and is then submitted to the network of sellers.
Having decided to 'boot-strap', or self-fund the business, Rogers says one of the key moves of the pre-launch phase was to establish a development centre: "There's quite a bit of overhead with the office space and the equipment, but we have got some amazing guys who can really pull the stops out when we need it." Extra-curricular software development by the team also helped to pay the bills at times when money was tight, he reveals.
As things stand, the site is wholly owned by its founders. Money was offered by various outside backers, but the decision was made to keep what Rogers wryly calls "a clean capital base" - though for the planned US launch later this year, they expect to bring in extra investment. "The actual process of raising money takes a good six months," he says. "One of the advantages of boot-strapping is that you can save that time and put it into building out your idea, building up the system and doing whatever the start-up needs to go through."
Alldigdown
Love user-generated content? Avoid Alldigdown: the digital entertainment social network, which launched in March built around legal, music, video and entertainment content, has an outright ban on it. It pitches itself as a one-stop shop for time-poor users, enabling them to buy music online, view video clips from FHM, Empire Films, ITN, Getty Images and Meet the Author, browse editorial from The Guardian, Blues & Soul and Clash, for starters.
"This is the first site to aggregate all of that and that is really important, because our target audience is adults who don't have time to look at dozens of different sites," says founder Shelley Taylor.
Alldigdown's revenue streams are diverse, "like any old-fashioned business", says Taylor. They include advertising and downloads, while the no-UGC rule is designed to maintain the commercial integrity of the site. Its backing comes from angel investors and a hedge fund, not VCs, but Shelley notes that there are still dotcom-sized bundles of venture capital flying around for certain kinds of unproven start-ups. "I have an opinion that people who are making investment decisions have selective memories," she says.
Music, most of it from independent labels, constitutes one element of Alldigdown, but Taylor is scathing about the prospects, in or out of a recession, of services that aim to make money from digital music alone. "I don't actually hold out much hope for anything that is purely music-dominated, or social networks and music combined, because they both have fundamentals that go against them," she says.
Deal Autos
Having maxed out his credit card, systems analyst Nigel Daura decided the best option for clearing his debts was to launch a business. Three-and-a-half years later, Deal Autos was born. Entirely self-funded from his own salary and built by a small team working on their own time, it hasn't yet delivered Daura from all financial worries, but it does offer an alternative, flat-rate marketplace for new and used cars.
"Other classifieds charge different prices for ads depending on the vehicle type or the type of dealer you are," says Daura. "I don't see why people should be penalised for those kinds of things when it costs the same amount of money to host any ad, so we have just gone for a flat fee across the board."
Our declining interest in buying cars just at the moment, allied to the challenges of securing coverage for an automotive venture, slightly dampened the site's March launch. The 70,000 launch ads were largely given away free to build inventory, but Daura remains confident that Deal Autos has a place in the market, and when the visitors begin to come in numbers, so will the ads, both classified and display.
"When everything is going well, people have one brand they are used to and they stick with it," he says. "But when things are going badly, people are more open to new things."
Neighbo
Working on the principle that online communities can serve real-world communities, rather than subtly undermining them, Neighbo, a social networking service for landlords and residents, came out of beta in January.
The online utility aims to bring together tenants, leaseholders and housing managers to achieve common goals, share information and improve real-life experiences. Effectively, Neighbo acts as a subscription-based intranet and portal for groups of tenants and their landlords. It is a property-related start-up, but as it doesn't depend on the health of the housing market, the recession doesn't constitute a drag factor, says managing director Paul Fox.
"Housing is still there and it needs to be managed," says Fox. "In fact, part of the point is that we can offer cost savings."
Besides subscription revenues, Neighbo has a long-term plan to introduce advertising, with obvious potential for locally targeted ads. For now, the site isn't chasing ad revenues, though Fox freely admits that the crunch made funding harder to find. "We did have difficulty finding it, because we were being asked for a lot more proof of concept than we could give in the first instance," he says.
"We have got a collection of individuals and one big shareholder, but our big plans, our blue-sky thinking, have been scaled back. It makes us much more focused on client feedback and usability that will drive subscriptions and membership."
Sivvle
Many technology launches spend a period of time in stealth mode while they are developing their proposition and their technology, and Boston-based start-up Sivvle is doing just that. But in the communicative modern way of things, its founders are blogging and tweeting about the otherwise stealthy process.
Exactly what Sivvle is remains a closely guarded secret, but founder Chris Knight, a veteran of a handful of other technology start-ups, is prepared to reveal a certain amount, beyond which we need to use our imagination.
"Savvle is a communications and productivity-enhancing tool with some new technologies, aimed at consumers and at businesses," he says. "The consumer aspect is more social and will be free to use. The business aspect is marketing-oriented and comprises fee-based services. It is a ubiquitous technology, and the apps are really wide-ranging."
Another boot-strapped effort, Sivvle now exists in prototype form with a view to an autumn launch, and Knight is on the verge of engaging potential investors. In this regard, the chatty-stealthy technique has worked reasonably well, and he reports solid interest. "Money is a little tougher to find right now, but we think we are positioned in a good space investors will respond to," he says. "They are looking for mass appeal, and if you are also a productivity-enhancer or a cost-cutter, there is always a market for that. Mobile apps and integration with web services is a hot sector, as well, and I think we hit all of these."
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