The Upside of a Downturn in Silicon Valley

[Commentary] Tech investors are known for their strutting optimism, but the best of them are keenly aware of the motivating powers of impending doom. Some of the most successful tech investments of all time — among them Google and Facebook — came about in Silicon Valley’s lean times.

This is a paradox of invention, as well as of investing: Bad times feed good ideas, which in turn lead to good times, which breed complacency, waste and lots of bad business plans.

No one in the tech industry knows if the recent stock market turbulence will prompt another opportunity to mourn good times. But some venture capitalists are beginning to plan for a leaner era ahead. Sooner rather than later, some external shock may prompt a slow-moving retrenchment in the fund-raising for start-ups. Money will dry up, companies will face hard choices, and there will be layoffs, shutdowns and much heartache. That may just be what Silicon Valley needs.