Jason Calacanis thinks we’re in startup depression. He’s probably one of the more qualified to comment, having built several tech companies in the last decade (Silicon Alley Reporter, Weblogs, Inc, Mahalo) including one which rather famously died in 2002 (Silicon Alley Reporter).

Now, I don’t think most of us running self-funded Internet businesses need to be worried about a depression. Sure, we may see fewer customers or sales over the next year or so, but we don’t need to worry about venture capital drying up. (Basically, because we’re not seeking or relying on it.)

But for those of us relying on venture funding to get our products and business off the ground… be worried, very worried. That is, if you take Jason Calacanis’s article ‘(The) Startup Depression’ to heart.

According to Jason, ‘the economic downturn will be much worse than it is today… 50-80% of the venture-backed startups currently operating will shut down or go on life-support (i.e. 3-4 folks working on them) within the next 18 months.’ He believes that 8 out of 10 of all the ‘Web 2.0′ startups to raise an A or B round of venture capital will go under.

I guess Jason Calacanis can relate. His first business, Silicon Alley Reporter, went from 70 employees to 12, and with the bank account running out of funds, he struggled to meet payroll. And that was BEFORE the stock market crashed in 2000.

But, according to Jason, that was the ‘darkest hour before the dawn’ and it was just a year after the company went under, that he started Weblogs, Inc. Just 18 months later, Jason sold Weblogs, Inc. to AOL for $25 million.

Which is why Jason Calacanis’s seemingly negative article is really a message of hope. This quote from Jason’s article applies not only to tech startups in the grip of the economic depression, but also to ANY entrepreneur struggling to get a business up and running or through any kind of difficulty:

‘If you’re failing right now, and if you’re suffering, you need to take Kurnit’s test. You need to access where you’re at and you need to fight on. You can give up, sure, but the truth is that when you give up, you have to live with that fact for the rest of your life. For me, living with having given up in tough times is a much worse fate than certain failure.’

(According to Scott Kurnit there are three (3) reasons why a business will fail: bad idea, bad execution or outside factors.)

If you want some timely inspiration – and a quick education in what makes for a successful growing business - I definitely suggest you read Jason’s article, if only for a full explanation of his 10 tips for getting through tough times:

1. Execute better.
2. Grow the talent you have.
3. Fire the ‘average’ people on your team.
4. Cut spending every where you can.
5. Find a revenue stream and ride it.
6. Focus on your profitable clients.
7. Make your top 10 performance areas 10% better.
8. Hold an optional off-site breakfast meeting on a Sunday and see who shows up. Whoever doesn’t show up is unlikely to step up during the tough times: fire them.
9. Build market share.
10. Raise money.

(Those tips about firing people may sound harsh… but may just be the right advice.)

Source: Jason Calacanis, “(The) Startup Depression”, September 29, 2008, Calacanis.com