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Brace yourself, entrepreneurs and techies – Another nuclear winter is upon us

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RESEARCH TRIANGLE PARK, N.C. — Brace yourselves, folks, if you work for a startup in the high-tech or life-science sectors or are an entrepreneur seeking to start a business. Another “nuclear winter” is upon us.

Need proof? Nortel debt is junk and its stock is worth a buck. Sony Ericsson cut hundreds of its workforce in RTP. And, below the radar as usual, IBM is slashing execs and contractors.

Need proof at the startup level? Look at Hatteras Networks, which cut its work force from 80 to 60 on Friday out of concerns that 2009 is going to be one bad year. And Integrian may be sold. These are two of the brightest lights in the Triangle’s tech culture.

Let’s not leave out life science, either. This nuclear winter is likely to cause major frost damage to big firms like GlaxoSmithKline, which is already slashing costs and work force, as well as biotech startups that will need major funding for proof-of-concept and product clinical trials. Biolex in Pittsboro recently closed on $60 million. Don’t look for other big closes any time soon, though.

Can this be deja vu all over again, as Yogi Berra once said?

Is it same chapter, same verse?

Yes, but there are differences.

Can it be only seven years ago that the “dot-com” balloon burst and the telecom sector imploded worse than Wall Street’s late investment banks? Yes.

Can it be that another crushing down cycle is upon us? Yes. But this time the culprits are not overzealous investors backing business plans written on napkins at the height of the dot-com boon. And telecom is not sinking into red ink or little or no growth due to overbuilding of networks.

No, this time tech and telecom – and life science, too – are getting crushed by the Wall Street credit crunch and a global recession.

Instead of leading the economy into a tailspin as the dot-commers and telecom execs did, this time tech leadership is being caught in the whirlpool created by the real estate fiasco that has frozen credit markets like they were in 2001-02.

Where are startups going to get funding if venture capital firms can’t executive “calls” to get money from investors? Silicon Valley already is awash in that problem. Will smaller regional firms face the same problem?

Where will the dreamers who need angel funding find backing if angels have lost 30, 40 or 50 percent or more in their own holdings due to the market meltdown?

Perhaps this nuclear winter won’t be as bad for the tech sector since it is not the fulcrum of the problem. But lack of money – the blood of entrepreneurship – could very well cause the death of many startups or cause many of them to cut workers in desperate attempts to preserve cash.

And even in the financial misery, the best entrepreneurs will find ways to survive, flourish and grow. After all, the dot-com bust did help trigger Web 2.0.

Telecom survived leaner and meaner – with a new AT&T and a much larger Verizon and with startups such as Bandwidth.com (we have mentioned them often before) growing as competitors.

But what of biotech and medical devices? These categories, like alternative energy, have been investor darlings. Now they, too, face freeze warnings.

Global warming or not, we’re in for a cold, cold winter. Thank goodness energy prices have dropped so we can at least turn up the thermostat at home – as long as we keep our jobs, anyway.

The Skinny

WRAL Local Tech Wire Publisher and Editor Rick Smith dishes out tidbits from the local technology sector. Read more articles…