- Tech legend John Chambers warns that the next two to three quarters will be “very brutal” for startups due to the coronavirus crisis.
- The former Cisco CEO projected that 30% to 45% of startups “will disappear in the next two years.”
- Still, Chambers has optimism for the future: “You have to immediately say: ‘How do we become a startup nation again?'”
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As the coronavirus crisis enters its third month, tech legend John Chambers offered this advice to startups: brace yourselves for an even rougher ride than anticipated.
Chambers, who led Cisco for two decades, said that he expects that many startups will likely not be able to survive the deep economic crisis that the pandemic has caused.
“My fear that has become more pronounced is that there’s going to be a lot more startups that don’t come through this,” he told Business Insider. “I’m modelling the next two to three quarters to be brutal, very tough on employment, very tough on startups not surviving, very hard to get money in venture capital.”
Chambers, now the CEO of venture capital firm JC2 Ventures, made the dire prediction as a wave of tech companies, including leading startups, announced tough measures, including layoffs and furloughs, due to the pandemic.
Chambers said he projects that nearly half of US startups are not going to make it in the next couple of years.
“It would not surprise me to see 30% to 45% of startups disappear in the next two years,” Chambers said. “This is often what occurs during an economic downturn. I hope I’m wrong.”
As of March, there were more than 10,000 startups in the US, employing about 2.3 million people, according to the National Venture Capital Association.
Chambers has been a staunch believer in the role that startups play in the US economy, especially in creating new jobs. He’s also been outspoken in warning that while emerging technologies like artificial intelligence will lead to a new wave of innovation, they will likely destroy jobs, too.
“If you need 25 million jobs in the next decade — which we do as a country to support new job seekers — and we’re going to destroy 10 to 15 million jobs through artificial intelligence and digitization, you really need a program for 40 million jobs,” he said.
In an interview with Business Insider late last year, Chambers argued that the country needed more startups to create those jobs and it also needed more startups to go public earlier. Unfortunately, both requirements seem stymied as the coronavirus crisis threatens the very survival of so many startups.
“Now that we’re going to lose a number of them, which we will unfortunately, startups won’t be proliferating at the speed I think we need,” he said. “You have to immediately say: ‘How do we become a startup nation again?'”
Despite his warnings, Chambers actually says that he’s optimistic about the future. Past crises, like the dot-com crash, the 9/11 attacks and the 2008 financial meltdown, led to a new wave of growth and innovation, he said, and expects that the same will happen in this case too.
“People say, ‘John, aren’t you more pessimistic about our future?” he said. “I’m the reverse. I think this could reignite America’s innovation startup engine. And we need it.”
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