Be prudent but don't panic!

The alarm bells are ringing in Silicon Valley and start-up land today with Sequoia Capital and Ron Conway telling companies to prepare for the economic meltdown and to raise cash by cutting their burn.  This is not new news as being in New York we started to feel the real economic impact in mid-September as Lehman melted down and as Merrill Lynch was bailed out by Bank of America.  This is all prescient advice and something I have been espousing to my portfolio companies for awhile - see my last post from mid-September on Doing More with Less, a mantra that all startups should live by.  All that being said, it is not time to hit the panic button.  Don't go out and fire everyone wholesale and skinny down just because everyone else is. Do it because it is right for your business and because all of your leading indicators tell you to do so.  Do it the right way by not making a 20% cut across the board but by thoughtfully thinking about your business, your priorities, and where you need to focus your capital and resources to grow your revenue but conserve cash.

The good news is that many companies I have seen have learned their lessons from the last bubble bursting and rather than subscribe to the "if you build it they will come" model have turned towards the "release early and release often" model of gaining customer traction sooner rather than later and at much lower costs than before.  As I look at the current landscape, obvious areas of concern are any companies with high fixed costs and heavily reliant on direct sales whether it be advertising related or enterprise related.  It is clear that for these big ticket sales that many corporations are in the mantra of doing nothing rather than doing something and that startups should adjust their budgets accordingly to reflect this reality.  For those companies that live by the frictionless sales model and that are capital efficient with a low fixed cost base, take another hard look at your organization and priorities and haircut unneccessary expenses.  Once you do all of that and feel that you have 18+months of runway, look on the positive side as there will be many great people on the market.  Yes, cash is king and if you have it and conserve it, there will be some phenomenal opportunities to pick up some great talent.

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Delivering on Q3 forecasts!

I received some incredible news last night from two portfolio company CEOs updating me on our Q3 numbers.  They not only hit their respective forecasts set early in the year, but they beat them.  Normally I expect our portfolio companies to hit their numbers, but I am ecstatic because we delivered in the midst of […]

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Doing more with less

Being in New York, it is hard to escape the realities of the ailing financial sector.  When I took the train into the city this morning I could see the somber look in people’s eyes knowing what had just happened to Lehman Brothers and the uncertainty of the financial markets and economy.  Given this state […]

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Selling to large enterprises costs big dollars no matter how frictionless your sale is

I have written a number of times about frictionless sales and how on-demand companies have a huge opportunity to reduce their sales and marketing costs and subsequently scale their business more efficiently.  Here is an excerpt from a prior post:Frictionless sales means reducing the pain for customers to adopt and use a service/product and consequently […]

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M&A – it ain't over till it's over

The economy is clearly slowing down and the IPO market is nonexistent.  As I have always said, this is the time to hunker down and tweak your business to get your model right.  If you are interested in exiting today, M&A continues to be the only viable path along that front.  Having been through a […]

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What do I see in venture through 2010???

The Jordan Edmiston Group recently asked me and a few other VCs a few pointed questions about the future for circulation in their July Client Briefing.  As an aside, I worked with JEGI two years ago and they did a fantastic job helping us sell Moreover Technologies to Verisign.  They understand the media and online […]

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Data wars heating up – Microsoft buys DATAllegro

As I have written in previous posts, what you do with data will be one of the next battlegrounds on the web.  Knowing that they had some limitations with SQL Server, Microsoft announced its acquisition of DATAllegro (full disclosure: my fund is an investor in competitor Greenplum) to enter the data warehousing market.  Enterprise volumes […]

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Your reputation matters – how to handle reference calls

The world that we live in trades on reputation.  What that means is that eventually whether you are raising capital or landing new customers, your references will matter.  If you are an entrepreneur, a VC will want to do some deep reference checks on you and also on any major customers or partners.  If you […]

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Raising capital and meeting expectations

What I like to tell portfolio companies is that on average it will take 6 months to raise capital with some cycles being shorter and some being longer. Given that, it is imperative for a company to start thinking about its next round well ahead of time and the milestones it needs to hit to […]

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The next generation web – scaling and data mining matters (continued)

I had some interesting meetings yesterday and as I reflected on them this morning, one common theme emerged which is that the next generation of the web will be built on data mining and extracting intelligence from the reams of data web services collect on a daily basis.  This reminds me of a post I […]

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