Over the last few weeks, Valley VC firms have bombarded portfolio companies with memos and presentations designed to soften them up for the coming cram-down round.* Companies that got the message are frantically slashing costs and readjusting valuation expectations.
But at least one Valley CEO isn’t.
BusinessWeek’s Spencer Ante spoke to Gajus Worthington, the CEO of chip-maker Fluidigm, whose company is on track to burn through its capital by the end of next year. Is Worthington following the VC firms’ advice now that its IPO has fallen through? No, sir! It’s pedal-to-the-metal for Fluidigm:
The chief executive of Silicon Valley’s Fluidigm set out to take his chipmaker public about a month ago. On Sept. 5, the first day of the company’s road show, Worthington gave a standing-room-only presentation to blue-chip investors interested in buying Fluidigm stock. Three weeks later, after Lehman Brothers filed for bankruptcy and panic seized investors, he pulled the plug on the initial public offering. Worthington realised he couldn’t proceed after money managers he met with in San Francisco told him they didn’t even know how long they’d have jobs. “You could smell the fear,” he says. “It was a black hole of anxiety.”
Now, Fluidigm is in an awkward position shared by many of the most promising startups in the country. It has built up substantial operations in hopes of capitalising on future opportunities and is burning through cash at a time when it’s nearly impossible to get more from public investors. The company had $32 million in cash as of the end of June, and it’s using $6 million to $7 million a quarter. Although Worthington could run out of money at the current burn rate by the end of 2009, he says he won’t cut back, at least for now. “Our primary focus is growing the business,” he says.
Worthington believes that, if all else falls through, he’ll be able to raise money from Wall Street fund managers or company executives (who, last time we checked, were losing their shirts):
“This is not the first time we’ve been through this kind of thing,” he says. “We’re just not rattled by it.”
Well, get rattled, Gajus!
*Don’t know what a cramdown round is? That’s when your VC partner informs you that the valuation of your next round will be 1/5th of the valuation of your last round and that the equity you’ve sweated for for the last two years might someday buy you a Cherry Coke. Your VC will pretend to be depressed about this unfortunate set of circumstances.
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