I am guessing you will have seen the many sites and blog posts about VC being in deep trouble and us Entrepreneurs even deeper every time there’s a recession or market correction?
These are typical overreactions in my view. Sure the stock market has been hammered and sure the markets are down and there will be a recession – but hey, why the long face?!
To me, this is all good news (in a weird sort of way)…
What do I mean? Well, it’s good tactics to get all your portfolio companies to “wake up and smell the coffee” if you have stuffed them full of cash and they are happily burning it at a fast rate and you don’t want to have to “back-stop” all of them with a ton more.
But why I ask aren’t they already practicing frugality and conservative expenditure? – the recession is nothing new and the markets have been on verge of this disaster for some time?
I guess this is an old entrepreneur talking, one that likes to bootstrap and not waste a “bean” if I don’t have to, one that outsources and cost saves where he can but spends on the essentials…just a state of mind. I would have been insulted if I have been a Benchmark or Sequoia had made me watch their “lecture”.
Anyhow, back on to the point – in times like these opportunity abounds for smart entrepreneurs…
Competition is squeezed, everything gets tougher, and most importantly: customers are woken up from their slumber and start to look for better deals – they want to save time, money and at the same drive more revenues and profits from their existing business/customers. In short, they want greater efficiency!
Now when things are fine and the money is flowing people get lazy and that makes it hard for the “new girl” (startup) to get in the door with her amazing new service/product because INERTIA gets in the way…but now things are different. Now that purchasing dept needs to look like they are earning their keep and the CEO has to start making tough decisions.
So GREAT – don’t stop sales and marketing, double it, cut everything else – get out there and start pounding the streets and hitting all those places you wanted an “in” but got a “no” not that long ago…I am betting a great deal of those prospects will now start to listen.
It has been shown again and again that in tough times some of the very best companies grow and flourish…and the very best startups get a chance to shine and get a foothold.
So my advice is to forget the “nay-sayers”, get busy, get the attack plan sharpened up, and get selling – let’s sell our way out of the problem and not get caught up with negative thinking from the media.
Paul Graham makes some great points in his blog:
If we’ve learned one thing from funding so many startups, it’s that they succeed or fail based on the qualities of the founders. The economy has some effect, certainly, but as a predictor of success it’s rounding error compared to the founders.
Which means that what matters is who you are, not when you do it. If you’re the right sort of person, you’ll win even in a bad economy. And if you’re not, a good economy won’t save you. Someone who thinks “I better not start a startup now, because the economy is so bad” is making the same mistake as the people who thought during the Bubble “all I have to do is start a startup, and I’ll be rich.” http://www.paulgraham.com/badeconomy.html
Take a look at this VC presentation and compare and contrast it with the Sequoia one…guess which VC I want at my “back” right now?
And here is the now fabled Sequoia deck…
Now don’t misunderstand me, it’s good to let your “people” know what you think as VC and to give them useful facts like these and I am sure they didn’t mean to do anything with this other than to drive home “cash efficiency” but let’s not use it as a reason to get down and instead use that old line:
“When the going get’s tough, the tough get going…”
On a final point – don’t take this as a post to “knock” the concept of cutting the “burn” or saving and conserving cash – it is not – it is about adopting those measures and a positive attitude to the chances of getting even greater success now that a recession is here…not a lower chance!