Sorry, Startups: Party's Over
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.
LATEST: Stock Market Crushed
See Also: Super Angel Ron Conway: Don't Quit Your Day Job
Angel Investor Roger Ehrenberg: Here's How To Get My Money
Good News, Startups: You're Not Screwed
Fred Wilson on the Startup Depression
For startups, this is a MUST read post that I originally wrote as a comment on articles such as this;
A MUST read for any startup looking to not only service, but prosper during the upcoming downturn;
http://bit.ly/LSdFn
www.twitter.com/A_F
Does that mean you just realized we were in a recession? I hope not, b/c we've been in one for a long time. And some of us have been blogging about the coming asset and credit bubble implosion for years. True, not all startup entrepreneurs are as aware of economic and financial conditions, but certainly all of us who went through the last meltdown, which only ended six years ago. Even the ones who are younger than that must (cannot be as clueless as a person would have to be to just now be noticing the trainwreak that's been all around them for over months, if not a year+.
But many startups will survive because they do things better, faster and cheaper. Nimble operations with a unique approach to solving old problems are in a great position be more efficient than established players in their industry.
Don't lose money. Make sales or fire people.
Here's a story on how a billionaire started during the last depression:
http://smartstartup.typepad.com/my_weblog/2008/02/a-billionaires.html
I look forward to seeing which of these start-ups are actually businesses that can make money instead of millionaire dorm rooms.
Presumably even this gravy train will end someday.
Also, I can't really figure out what the Apiro folks do from their website, and I actually spent a few minutes on it.
Most of the startups I have worked for are about as functional as the McCain campaign.
I once worked for one of the biggest players in the old dotcom bubble and his famous quote was "I could teach my dog to be a VC".
www.confiz.com
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