How the Downturn Will Affect Video Startups: One VC’s Take

We asked Danny Cohen, a venture capitalist at Gemini Israel — which has multiple online video investments including, Intercast, and Novafora — what advice he will be giving his startups about coping with the economic downturn.
Cohen first told us that video startups will need to take into account more general industry trends, such as softening demand, fewer new investments by VCs and lowered valuations. He said all startups should make sure they can run for 24 months on their existing cash, and if they can’t, start fund raising ASAP. Cohen also noted that run rates will be important to attracting top talent, who will be holding onto their existing jobs unless you can offer them something really stable.
What about video startups specifically? Here’s Cohen’s take, lightly edited:
1. Entertainment is usually less affected by recessions. People still consume TV, movies and video. Sometimes this consumption goes up as people have more time (because they lost their job) or are looking to entertainment as a way to forget about the hard times. Based on that, video distribution companies and video production companies will continue to see similar demand.
2. Video advertising will be hurt, as the whole advertising industry will slow down. The good news is that that video advertising is coming out of the “experiment” budgets, and as such, video advertising will be hurt less compared to other new advertising categories.
3. Hardware sales will slow down. People will postpone their decision to do the Blu-ray upgrade, iPod upgrade, etc.
4. Fund raising in the video sector will slow down. We will see less investment in ad-supported models and in companies with non-existing business models.
If you’d like to hear more from Danny, please come to our NewTeeVee Live conference on Nov. 13, where he’ll be sitting on our venture capital panel with Dan Beldy from Steamboat Ventures, Aydin Senkut from Felicis Ventures, and James Slavet from Greylock. Tickets are on sale now.