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Tough times ahead for Silicon Valley?

Financial crisis puts squeeze on tech sector start-ups.

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For Win Betteridge, the nationwide financial meltdown has meant one thing: opportunity.

At a time when many people have been guarding their cash, the young entrepreneur decided to go shopping for other websites.
Mr. Betteridge is CEO of Genesis Interactive, an Internet company in San Francisco that runs GotGame.com, a social portal for video-game enthusiasts.

Eager to boost traffic to the site, he targeted an online video site called GameVee.

A clash of the titans this wasn’t. Both companies had similar size staffs and were new to the Internet scene. But Betteridge’s site had a larger following and was flush with cash from a successful round of fundraising in April. With the mood among venture capitalists turning increasingly cautious, GameVee’s money-raising potential was far from secure. In the end, for a relatively cheap price, GameVee decided to sell for about 2 percent of Genesis’ stock, valued at about $125,000.

“For companies that can stay afloat, there is opportunity,” Betteridge says. “This is very much related to the financial downturn. If you’re smart, the strategy might be to acquire.… Some companies that are in pretty desperate straits.”

After celebrating his acquisition and merging personnel, he did something that tells of lean times ahead: He cut his staff by 20 percent.

Betteridge’s aggressive conservatism is in many ways emblematic of the current uncertainty in the Silicon Valley, where young technology companies are preparing for trouble in the months ahead with less investment capital on the horizon.

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