We live in difficult times - but keep your eyes on the prize
According to GigaOM Sequoia yesterday called their portfolio company CEOs to a meeting, greeted them with the above image (or something like it), and went through a set of presentations telling them how they could cut costs in each functional area of their businesses.
On a similar note I have heard that a leading European VC is instructing all of its portfolio companies to cut costs by 25%.
So what to make of all this?
Clearly times are bad, and I agree with the assessment of Mike Morritz (probably the most successful VC on the planet), from the FT earlier this week:
It’s pretty clear that demand is going to soften across the board for every company - it doesn’t matter if you’re selling to consumers or
companies.
But at the same time opportunity often comes out of adversity and I agree with Alan Patrick that there is now a risk the herd starts stampeding in the opposite direction and companies over-compensate for the changes in the macroeconomic environment.
As ever in life small company success is about striking the right balance between risk and opportunity, and whilst for sure the balance has shifted it would be a mistake to think the equation has changed fundamentally (unless of course you are in banking …. or from Iceland … ).
October 9th, 2008 at 2:02 pm
Well at least we startups don’t have billions of debt or a stock price to worry about
And the big guys that will fall during this tough period will leave plenty of space for ‘us’. The question of course, is which one of us.
To add to the scenario mix, this is what Mr Roubini has to say about how much worst things can get in the coming weeks.
http://www.cfr.org/publication/17457/steps_to_halt_the_slide.html?breadcrumb=/
October 9th, 2008 at 2:10 pm
[...] Two types of businesses for the downturn Image by Jeroen Krah via FlickrAs austerity takes over from ostentation, sensible investors are telling their companies to knuckle down and reduce burn. Hat, tip Nic. [...]
October 9th, 2008 at 3:49 pm
the times are fine, the cumulative reactions of humans is the problem
October 9th, 2008 at 4:24 pm
Hi Nic - I’d actually be a little affronted if a VC called me in to point out that I may need to cut costs during the economic meltdown and then follow that up with direction on how to do so. Surely, you’d hope to invest in a team that can see this and do it for themselves?
October 9th, 2008 at 4:57 pm
I agree Scott.
October 9th, 2008 at 5:18 pm
Less opportunity for the mediocre to ride the bubble, but just as much opportunity for the great. The fact remains that startups are created to solve problems and problems still exist during recessions: in fact economic turbulence creates a multitude of problems to be addressed.
October 9th, 2008 at 5:44 pm
Its a great time to build a differentiated offering that wont have 10000 other clones.
October 14th, 2008 at 9:53 am
[...] of advice dispensed recently on what companies should do to cope with the down turn. I posted some thoughts on this last week in response to Sequoia’s advice to their [...]