Ex-Cisco chief John Chambers says more than 1/3 of all startups will fail in the next two years

If you ask John Chambers, the startup world is about to be hit with a cataclysm: Within the next two years, at least a third of all startups will die.

That’s a natural consequence of the last few years of record-breaking venture investing, said Chambers, the former CEO of Cisco Systems. It’s a similar story that played out in the dot-com boom and bust 20 years ago — there was too much money going into too many startups that had too little opportunity in front of them, he said.

“The market got way overheated,” Chambers said at the TechSurge Summit event Monday at Mountain View’s Computer History Museum. “We tend to forget about every ten to 20 years our lessons learned that would repeat with the dot.com bust.”

The looming failure of so many startups is a necessary correction, said Chambers, who invests through the family office he launched in 2015. It will result in a “healthy” winnowing of companies and investment firms, he said.

And such bad times can offer opportunities for both investors and the companies that are strong enough to hold on. Some of the companies he backs will have a chance to make acquisitions, for example, he said.

For investors and companies, this is a moment to be agile, and move quickly, he said. Great companies will be born during and emerge from the morass, and they’ll find funding, albeit in more modest amounts than seen in recent years, he said.

Chambers has been through his share of downturns. During the dot-com bust, he was running Cisco, he recalled. Billion-dollar-a-year customers disappeared, and the company went from posting rapid revenue growth to shrinking sales.

The key difference between now and then is that companies see much more value in technology and are more committed to their tech budgets than they were then, he said.

“Technology is no longer a separate cycle,” he said. “It is integral to every business.”

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