'Sharp drop' in US tech start-ups

http://news.bbc.co.uk/go/rss/-/1/hi/business/8057163.stm

Version 0 of 1.

The number of new technology start-ups in Silicon Valley fell 65% in the first three months of 2009 from the same period a year ago, figures suggest.

Industry blog TechCrunch.com said there were 184 new start-ups formed between January and March, from 546 in 2008.

Venture capital financing was down by 50% to $3.1bn (£2.3bn) in the period.

The fact that Microsoft, Google, Yahoo, or Amazon did not make an acquisition was "perhaps most telling" said TechCrunch founder Michael Arrington.

'Particularly hurt'

For many start-ups, being bought by a bigger technology firm is seen as the ultimate goal.

But industry analysts say that bigger companies are not willing to take a chance on buying smaller firms - while investors are not looking to take risks by putting money into start-ups.

"Silicon Valley and the start-up ecosystem certainly was not immune to the general economic malaise," said Mr Arrington, adding that start-ups have been "particularly hurt".

The fall in investment mean that start-ups in their early stages were "working hard to more with less" he said.

The CrunchBase report also found that the average number of staff employed by new start-ups fell from eight in the first quarter of 2008 to six in the first three months of this year.

There had been only two large deals struck during the quarter, the report said, with Autonomy buying Cambridge-based infrastructure software company Interwoven for $775m and Cisco purchasing Pure Digital Technologies for $590m.