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I would have given my firstborn to be in this meeting
Posted by Chris Knudsen on October 10th, 2008
Venture Beat is reporting on a meeting held by the boys at Sequoia Capital (yes, the guys who backed Microsoft, Yahoo! and Google to name a few) on the current state of tech start ups and what the economic implosion means for venture backed companies. Here’s the summary:
- We’re in for a deep and long recession - possibly a 15 year turnaround. This will be different than past downturns.
- Get cash flow positive NOW. There will be no further rounds for companies that are not cash flowing.
- The ad market is going to die.
- Mobile will not be immune to the downturn.
- eCommerce will suffer but its still the best model for the Web.
- The crazy valuations assigned to many Web 2.0 companies in the last three years are a thing of the past.
- IPO’s and M&A activity will dramatically decrease.
- Only the most profitable companies will be acquired (we’re getting back to the basic fundamentals)
- We’re now in a “survival of the fittest” phase and it will be this way for a long time.
- Even engineering head count reductions should be on the the table (that’s unreal!)
- Look for alternative means of compensation for your sales force - increase commissions to further motivate your sales force.
- Throw out all your spreadsheets and models. We’re in uncharted territory.
- Focus on quality.
- Cut everywhere you can.
Here’s the slide presentation:
Hi Chris:
I didn’t look at the slides. But based on your precis, all this seems plausible except the one about the ad market dying.
I think there will definitely be a shake-up in the ad market, especially off-line. I can’t imagine how the big daily newspapers are going to survive in their current formulation, for instance.
But online is the only place (and maybe events, too) where a targeted customer could go from interest to purchase in one fell swoop. TV can’t do that. Newspapers can’t. Outdoor can’t.
The online ad market will be different in five years, that’s for sure. And there will be winners and losers no matter how long the recession goes.
But I’m much more optimistic about it than off-line ad market.
Left by Paul Jones on 10/15/2008