Even the most blissed-out startup entrepreneur has got to have a sense of what’s happened to the economy in the past few days — and what that’s going to mean for their business.
But just in case they’re not getting the picture, some of Silicon Valley’s most prominent investors are now shouting from the rooftops.
Sequoia Capital, best known during this bubble as the guys who backed YouTube, gathered some of their startups Tuesday for an emergency meeting. “The attendees were greeted by a cute image of a Grave Stone, with a message: R.I.P.: Good Times,” Om Malik reports. More details from VentureBeat:
“It was scary,” one Sequoia-backed chief executive told us about the Sequoia meeting, attended by scores of chief executives. It lasted several hours, and the message was bleak. The speakers and presentation were to be kept confidential. Things could get a lot worse than people think, and it will be a “more protracted downturn,” Sequoia partners told its companies. “They were not fear-mongering,” one chief executive told us. “They were smart speakers. Sequoia runs on specifics, they’re very data driven.”
Meanwhile Ron Conway, who was telling would-be entrepreneurs to consider keeping their day jobs last week, is now telling the startups he has funded that they’re going to need to start cutting costs, including people. Mike Arrington has reprinted the entire text of Ron’s letter to his charges, and it’s well worth reading. But here’s the key bit:
The message is simple. Raising capital will be much more difficult now.
You should lower your “burn rate” to raise at least 3-6 months or more of funding via cost reductions, even if it means staff reductions and reduced marketing and G&A expenses. This is the equivalent to “raising an internal round” through cost reductions to buy you more time until you need to raise money again; hopefully when fund raising is more feasible. Letting go of staff is hard and often gut wrenching. A re-evaluation of timelines and re-focus on milestones with the eye of doing more with less will allow you to live many more days, and the name of the game in this environment in some respects is survival–survival until conditions change.
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