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Falling VC Spending Affecting Tech Startups

  • CNet, Thursday, December 18, 2008 12:01 PM
CNet continues its series of special reports about the affect the recession is having on technology companies. Today's report documents the travails of a software-as-a-service (SaaS) company that sought its fifth round of funding on the same day that the market dropped 700 points and fell below 9,000 for the first time in years. OpSource has raised a total of $45 million from investors to date, but founder Treb Ryan says the company now needs another $20 million.

Ryan remains optimistic. "OpSource is not going away. SaaS is not going away. I know OpSource will survive and I look forward to the day when the markets pick up...I believe we will come out of this. I'm an optimist. That's why I'm an entrepreneur." Seven-year-old OpSource manages virtually all aspects of running and hosting businesses online. The bulk of OpSource's more than 200 clients are actually SaaS companies that use OpSource to provide virtual behind-the-scenes plumbing.

Though Ryan's company looks to be on solid footing, there's reason to be concerned. According to Dow Jones VentureSource, venture capital funding of U.S.-backed companies fell 20% $2.73 billion in the third quarter over the same time last year. As a result, OpSource has to delay its plans to go public, and will seek new funding instead. "Back in April 2007, we thought the public markets would be more open a year from now and we would be able to do an IPO," Ryan said. "But by this summer, with the market at 11,000, it was clear we wouldn't be able to do an IPO until the end of 2009. And now we're thinking maybe 2010."

Read the whole story at CNet »

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