Despite these tough times, there are still some bullheaded companies who think they can grow their way out of this mess or find the right M&A partner to bail them out. I can guarantee you that this is a recipe for disaster. I was on the phone today with the CEO of one our portfolio companies, and we were joking that we were in unprecedented times since we have been approached by a number of bankers about buying companies that are much larger than us. So if these bigger private companies are hawking themselves looking for a deal, where does that leave a small startup?
It goes back to my one of my themes about building a business – focus on what you can control and don't try to find a savior by looking at external forces. What this means is figure out what your core business is and take a scalpel and lop off the areas where you do not see an immediate return on investment. If you believe you will find a strategic partner to buy you, forget about it because every other private company that has been funded during the last 5 years is trying to do the same. In addition, I can also promise you that any large or small company looking to buy a startup does not also want to pick up a large burn rate. Even on a private-private merger, most of these VC-backed companies will do nothing unless the deal is cash flow positive on Day 1. Do yourself a favor, build an expense line where getting profitable can happen with the cash that you have. This way you can control your own destiny and also even make yourself a more attractive strategic partner to any company in the future. One other point for all of those advertising related startups-go find some other revenue streams like becoming a platform for partners via cobranding or hosting fees which scale with usage or find some other premium model because the ad market is drying up and the dollars will flow to some of the larger, more established platforms.