BY SHAY BEN-CHORIN
President and Chief Executive Officer,
Virtio Corp.,
Campbell, Calif.

In these unstable economic times, it is easy to find bad news on a daily basis. Layoffs, missed financial targets, bankruptcy and stock downgrades are the norm, but there is still plenty of good news to be found, even for startups that need to be especially diligent to survive the downturn. Sometimes, the good news can even be the outgrowth of the bad news. These areas of bad-news-turned-good show how startups can survive in an unstable economy.

One of the main competitors of startups in our field are the internal efforts of leading companies. During the good days, companies developed technologies that were not part of their core business to increase their competitive edge. Even if those internal efforts were not on a par with the technology developed outside of the company, strong sentiments of NIH (not invented here) prevented startups from breaking into some large corporations. During the current difficult times, most companies stop investing in technologies that are not critical for their core business. However, these same companies are much more receptive to buying such technologies if they meet their needs.

Existing competitors have to focus on their core business to survive and are more likely to focus on generating revenue than capturing market share at any cost. With decreased revenue and fewer people, competitors are calling on fewer potential customers before you do. With some luck, maybe even an existing competitor or two will run out of money and will make more room for your company.

Another factor that has hit startups has been the diminishing amount of venture capital that is flowing into the electronics sector. With the lack of funding, one can expect less competition within the next few years.

In addition, companies that once thought they were indomitable are finding that the key to their survival is their ability to form strategic alliances and partnerships with companies that provide complementary technology. As a result, there is less arrogance and more motivation than what existed only a few months ago.

In early 2000, we interviewed people for key executive positions. Many candidates we talked to had unrealistic expectations that were the fruits of the bubble. In today's market, those unrealistic expectations have dissipated, paving the way for hiring the best candidates. If your technology is sound, the management team is good and your company's culture meets the expectation of the candidate, you will be able to attract the right people. How well a startup structures and manages its business model and utilizes its resources will determine how well it survives the difficult times.

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