Advice from the founder of Business Objects on how to cope with the downturn

By September 18, 2008Uncategorized

Posted by mobile phone:
Every day now people ask me what impact the current economic malaise will have on startups. My standard answer is that so long as you are attacking a growth market (and if you’re not that raises a bunch of other questions…) then it shouldn’t be the end of the world. It is likely the market will grow more slowly, but you can plan for that and still build a successful company.

Right now I’m sitting at Seedcamp in London listening to Bernard Liataud, founder of Business Objects, who stayed with the company from inception to $1.5bn in revenue.

He had two things to add on the subject of how to cope in a recession:
1. Focus on the core of your business – now is not a good time to start experimenting outside that.
2. Focus on your team. Communicate with them. It is an old cliche, but peiple are your assets and in times like this they worry. In the absence of communication they worry more.

I like both of these. In fact I am generally an advocate of startups staying focused on the core, even in good times (always assuming the core is strong enough, of course)

  • Hoover

    What impact will the economic malaise have?

    Credit will be less cheap than it was. If you’re taking out a bank loan to fund your business, more of your day-to-day cash will be spent on repayments. Which means spending less on other things.

    Nic, I’d speculate that VCs leveraging funds will need to pass on additional costs, so funding structures may become more onerous for startups. You may be able to correct me on this…

    The ftse was at 6730 in June last year, and is now at around 5,300. So new businesses that rely on custom from public companies may find them hesitating to spend money.

    But it’s important to keep things in perspective: how much more expensive will money be? How much less will customers invest? At the moment, the answer to both questions seems to be “not much”.

    New businesses are generally more agile and can cope with difficulties more easily. They also have better memories of dealing with hardship than established companies.

    The advice above, that you should concentrate on your core business, is OK. But you should always be asking “what do people want, and how can I deliver it?”. If that leads you to realise there’s a market for related products and services beyond your core business, then it’s obvious you should try to meet that demand if possible.

  • Hoover

    What impact will the economic malaise have?

    Credit will be less cheap than it was. If you’re taking out a bank loan to fund your business, more of your day-to-day cash will be spent on repayments. Which means spending less on other things.

    Nic, I’d speculate that VCs leveraging funds will need to pass on additional costs, so funding structures may become more onerous for startups. You may be able to correct me on this…

    The ftse was at 6730 in June last year, and is now at around 5,300. So new businesses that rely on custom from public companies may find them hesitating to spend money.

    But it’s important to keep things in perspective: how much more expensive will money be? How much less will customers invest? At the moment, the answer to both questions seems to be “not much”.

    New businesses are generally more agile and can cope with difficulties more easily. They also have better memories of dealing with hardship than established companies.

    The advice above, that you should concentrate on your core business, is OK. But you should always be asking “what do people want, and how can I deliver it?”. If that leads you to realise there’s a market for related products and services beyond your core business, then it’s obvious you should try to meet that demand if possible.

  • nic

    Hoover – very few VC funds are leveraged, so I don’t think the extra cost scenario you describe will come to pass. tks Nic

  • nic

    Hoover – very few VC funds are leveraged, so I don’t think the extra cost scenario you describe will come to pass. tks Nic