When venture capitalists must pull the plug on a struggling company, they often call Marty Pichinson of Sherwood Partners, who has liquidated almost 150 failed start-ups since the boom-boom late ’90s. American Way had a little chat with the man whom the tech industry might regard as the Grim Reaper.
American Way: Conventional wisdom says blue skies are back in tech land. No?
Marty Pichinson: I think people are still looking through rose-colored glasses. You’ve still got about 7,000 companies out there that have received funding since 2000. Some will go public; some will merge. But about 6,000 are among the walking dead. A lot of wireless and telecom companies are realizing they’re just not going to hit stride. Reality will set in around the beginning of Q3.
American Way: Wasn’t technology supposed to usher in a new age of increased productivity?
Pichinson: It did. Unfortunately, tech reduces costs by using more efficient equipment, fewer raw goods, and, sadly, fewer people.
American Way: What about hot niches like Wi-Fi?
Pichinson: Actually, Wi-Fi is finished. There’s no room for anyone else, and Intel and other big companies are already investing in Wi-Max, with a 20- to 30-mile radius. That’s the future here and in developing countries.
American Way: Why do so many tech companies fail to make it?
Pichinson: It’s a world where the last man standing wins, and the business plan has no relation to reality. They have a dream, but they don’t know when they’re coming out of beta mode. Sometimes they don’t even know what industry they’re in.
American Way: How many companies do you expect to close this year?
Pichinson: We expect to do around 30 to 50 closures. In 20 to 25 percent of the companies, we’re able to save them if management lets us re-engineer and give them some breathing room. You can’t do that yourself; you need a third party to be objective, to be the doctor of reality. We’re circle closers.