Start-Up Shakeout Unlike Dot-Com Bust

How harsh has Silicon Valley’s start-up shakeout of 2009 been compared with the dot-com bust in 2000-01?

Back then, dozens of dot-com companies–from Pets.com Inc. to Webvan Group Inc. to smaller start-ups–went belly up after burning through hundreds of millions of dollars. Their downfall was swift; virtually an entire sector of dot-coms was wiped out in a matter of months. Silicon Valley went on to lose 185,000 jobs, or one in five, between 2001 and 2005.

This time, the damage from the recession has been widespread rather than confined to technology. In addition, many tech start-ups appear to have learned from the free-spending mistakes of the dot-com era and have hoarded their cash. As a result, venture capitalists such as Promod Haque at Norwest Venture Partners argue that “we’re not seeing the kinds of [start-up] shutdowns we saw in 2000 in terms of the volume.”

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