Does pickup in funding mean recovery is near?

June 1, 2003
Given that some startup companies are getting significant next-round funding, is that an advanced indication that the telecom recovery is near?
1304qa Chang New

Q: Given that some startup companies are getting significant next-round funding, is that an advanced indication that the telecom recovery is near?

A: I don't have a crystal ball, I don't want to legitimize speculations by regurgitating assertions, and I am not sure VCs have infinite wisdom. Market analysts who understand the big picture are not optimistic about a recovery anytime soon. Aside from pockets of opportunities, like in the access area, their predictions continue to be what might be called a "sliding three-year window" for the recovery of the general telecom market.

Exceptional start-up opportunities can get funded, although even then with great difficulty. But companies often get refinanced for not-so-obvious reasons. What you read about additional funding may not tell the whole story. A lot of VCs are in a "catch-22" situation in which a company is getting sample orders and "design wins," meaning products are being designed into new systems but there are no volume orders to make the company self-sustaining. Investors are "forced" to make additional investments to maintain the business infrastructure and stay in business so they will be able to catch the wave when production orders are finally placed. Another reason to invest is that so many companies are going out of business that big customers now demand to see a healthy balance sheet to make their own assessment of whether a supplier is viable. Most refinancing today is done with a significant drop in valuation and the terms of the investments also are unpublicized. Sometimes committed funds—the big numbers you read—are to be released based on milestones; the full amount may not be funded and there are serious penalties unless all the goals are met. Other times funding is in the form of loans secured by assets, including intellectual property, to ensure the crown jewels would not be part of the assets if the company goes into bankruptcy. The bottom line is these are tough times, and don't believe all the press releases you read.

Q: Don't you think it is disconcerting that some of my engineer friends have been unemployed for almost a year?

A: I'd be worried if I had to wait that long to land another job because that could be an indication that expectations and realities are out of sync.

I would encourage your friends to examine how they go about looking for jobs, what kind of jobs they are seeking, and maybe even to consider reinventing themselves (see "Business Forum," February 2003, for helpful suggestions). Jobs are hard to find, but they are out there. It may very well be that the good job affixed in your friend's mind is illusive.

A couple of useful concepts should be taken into consideration when developing a career strategy. One is to compete in an area where you stand out, and having multiple skills is a way to stand out. We engineers can compete very effectively with people who have a liberal arts degree, and several engineers I know who went on to get additional degrees are now very successful executives. In making career transitions, it is not uncommon to have to start over with a lower paying job, but move on to greater heights after proving yourself. The reality is there are successful people in all fields, not only in engineering. A good number of young people who went straight from universities to work for companies started during the bubble, in my opinion, missed an opportunity to learn transferable professional project-management skills that make them valuable employees elsewhere—developing or building products in a chaotic mode gives you the ability to deal with chaos specific to the company. This lull in the job market could provide an additional reason to learn that "one more thing" that you are interested in and to "launder" yourself for a different career path even if you remain in our industry.

About the Author

Milton Chang

MILTON CHANG of Incubic Management was president of Newport and New Focus. He is currently director of mBio Diagnostics and Aurrion; a trustee of Caltech; a member of the SEC Advisory Committee on Small and Emerging Companies; and serves on advisory boards and mentors entrepreneurs. Chang is a Fellow of IEEE, OSA, and LIA. Direct your business, management, and career questions to him at [email protected], and check out his book Toward Entrepreneurship at

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