VC-extraordinaire Bill Gurley’s Benchmark has had the same chat with its companies, but Bill tells peHUB that there’s actually an alternative to canning half your company: Move to San Jose.
How is Benchmark addressing [the Depression] concern? Are you providing your companies with a little extra financing or anything else to protect them?
I’ve never heard of that particular approach. You wouldn’t know where to set the price point. The most obvious conversations that people are having is about cutting costs. Even an incumbent is going to cut spending on R&D right now, so you can afford to be smarter rather an more aggressive. If your ability to generate revenue and you’re your ability to raise capital are compromised by the market, the only thing you really can do is extend your runway.
Not necessarily. I think you’d be surprised by delta of frugality that exists. There are some guys in our portfolio who are paying $3.50 a foot, then there are guys that are getting by in 75 cents a square foot down near San Jose. Some people make do with 150 square feet per full-time employee; others make do with 35 square feet. Those are the decisions and tradeoffs that people make.
Also, how much are you paying your [Standard] 409 auditor? Are you using a PR firm, and if so, could you take a more grass roots approach? Head count is just one variable that correlates with costs.
Bill’s also optimistic that we collectively learned something last time: That it’s better to fire half the company now, the way your competitor just did, instead of whistling dixie in denial while you burn through the rest of your cash:
You sent a note to your entrepreneurs. Did you send one to Benchmark’s LPs, too? Are you doing anything to manage their expectations?
I literally look at it as, it’s our duty as executives and investors to increase shareholder value. The question is what is the right decision to make that happen. We have an interesting dynamic in Silicon Valley. There’s a lot of memory about ’01 that wasn’t there in ’01. As a result, there’s way more cognizance than last time around.
What do you mean?
I’m interested to see how ’01 makes things play out differently this time. I think it could be a scenario where a competitor sees people laying people off, and instead of saying, ah, they’re going out of business, the thinking will be, they’ve already made staff reductions; they’re out ahead of me.
There’s an openness to the idea that being pragmatic is smart; there wasn’t a lot of awareness about what that meant seven years ago.