Start-Ups Slow Down to Survive the Downturn

With the economy faltering and ad dollars shrinking, more and more companies are going into survival mode, hoping that preemptive cutbacks now will prevent systemic implosions later, according to The New York Times.

Worried about the prospects of raising funding in the coming months and running businesses supported by advertising revenue in an economic slump, tech companies are increasingly cutting back costs, trimming staff and narrowing focus to wait out the economic turmoil.

Layoffs are becoming a morning staple — with a tally of 33,184 job cutbacks in our layoff tracker this morning. But rather than a sign of collapse, many companies — from AdBrite and Hi5 to Gawker and Mahalo — are slimming down to auto correct before the economy forces the hand of faltering firms.

Increasingly, companies are hoping that lowering their burn rate now will keep them afloat until VCs and banks are more generous with their money. However, cutting costs and skating by for the next few months by may just prolong the inevitable. From the Times:

That wholesale resetting of expectations might be the biggest change to settle over Silicon Valley. Instead of aiming for blockbuster public offerings or market-shaking acquisitions, most entrepreneurs now just want to endure. But if not enough people use these start-ups’ services and revenue does not grow fast enough to attract potential acquirers, mere survival may not look so good.

Photo: Flickr/ Brett L.