Are tech start-ups recession proof?

 These are crazy time for the tech industry and one might want to think that things might be slowing down for not only seasoned grizzled vets but also for the young and dumb and full of vim and vigor start-ups. So are start-ups recession proof? They might be, especially if they are peddling Facebook apps but the bottom line is that the bottom hasn’t fallen out.

But, remember back in the day when you built your business model around the hopes that it would be purchased by another company? Well the times might be ripe for that type of scenario right now. Microsoft’s play for Yahoo notwithstanding, the buzz is that some large companies may shift from debt-fueled megadeals to strategic acquisitions, according to  GrowthPoint Technology Partners

One area that is still seeing some appreciation in values for example is for companies in the hottest areas or with the top management. An example of this would be in some of the social media type of applications and technologies.

One thing that helps to support the tech sector is its reliance on venture capital. VC firms love to take chances on the next Google, Facebook and thus alot of VC firms have already raised a significant amount of money and are unlikely to return it to investors simply because of a downturn in the economy.

A spokesperson at Crosslink Capital was quoted as saying that the credit crunch will likely dent the valuation of late-stage private companies. These companies will be unable to go public and also be compared against their public counterparts, which are declining in value. Hot private companies will still be attractive, in other words, but maybe not as expensive. Or will they?

Still, the change in economic winds has some normally optimistic entrepreneurs decidedly less so than they were previously. The consensus seems to be that some start-ups will either get acquired, get funding, or go belly-up. Not everyone stands to be crunched equally.  Enterprise companies, it’s been said are likely to get hit sooner than consumer ones, with both software and hardware firms at risk.

Microsoft belive it or not,may still be a good bet in uncertain times, Jeffries analyst Katherine Egbert said, “Seek safety in Microsoft’s numbers,” Egbert said, following its recent decline, Microsoft shares represent a “solid refuge.”

On the flip side, those likely to be hit hardest are technology firms that cater exclusively to the financial services industry or get a lot of their revenue there. But…that doesn’t mean that they can’t survive. There is still opportunity. Even in the worst of times, one door closes and another one opens.  To that end, expect to see a shift in the way technology companies market their products. The reason being that consumers and clients alike will want to see more of a bang for the buck as well as a focus on how product X is going to change the way they do business by improving the bottom line.

If there is one way to pull a country or a company for that matter, out of a funk, it with technology. Therein lies the potential for something to change people and change the way things are done, even in the worst of times. That, is the beauty of technology.

Will it be able to cure the ills of the housing market, the price of gas, the war in iraq or the upcoming presidential? Not yet. But if any industry has the resources and capabilities to make a difference, it’s Technology.

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