October 10th, 2008
Sequoia Capital hosted a big meeting with their portfolio companies a few days ago. Today someone posted what he says are the slides of their presentation. It’s an analysis of the trends that got us into this financial mess, and some brutal recommendations to startup companies: Sequoia Capital on startups and the economic downturn.
Om Malik at GigOM posted more details about meeting today. He says general Partner Doug Leone advised startups:
- Unprofitable companies would have a tough time raising cash, so get cash-flow positive as soon as possible.
- Cutting deeper is the formula to survive, and this is an era of survival of the quickest.
- Make sure you have one year’s worth of cash.
- If you have a product, reduce expenses around it and boost sales. If the product is ready, cut the number of engineers.
- Focus on building the absolutely essential features in your product.
- Be brutal when it comes to marketing — anything that isn’t working, cut it.
- Don’t burn through your cash, for cash is king
Posted in Economy, Silicon Valley, Tech Business | No Comments »
October 9th, 2008
The NYT reprinted an email sent by angel investor Ron Conway to his portfolio companies. And it is the same message that he sent out in May 2000: Godfather Tells Start-Ups to Fire People and Raise Cash.
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.
If you are in a funding cycle, you should raise your funding as soon as possible and raise as much as possible but face the fact that if you can’t raise money now you must cut costs.
Now, I wonder what advice he has for employees at those companies?
Posted in Economy, Tech Business | No Comments »
October 6th, 2008
I.P.O. Crisis Could Have Lingering Effect on Start-Ups
Many think start-ups won’t have a shot at an I.P.O. until 2010. If the United States is in a recession that lasts through 2009 and if the credit markets remain closed, only a very high-profile company would be able to make its debut [...]
Venture investors who had planned to take companies in their portfolios public this year are left spending money and time keeping these mature companies alive, instead of investing in new start-ups.
Posted in Economy, Tech Business | No Comments »
October 3rd, 2008
Job losses more than double in September
The Labor Department’s monthly report, released Friday, showed that 159,000 non-farm payroll jobs had been slashed, more than double the 73,000 jobs lost in August. First-time claims for unemployment benefits had increased last week to the highest level since the period after the 2001 terror attacks.
A deeper look at the labor data, some economists said, showed the “underemployment” rate had jumped to 11 percent — the highest level in 14 years — and the number of “discouraged workers” not seeking employment work also climbed.
“Factoring in discouraged workers raises the unemployment rate to about 7.9 percent,” said the University of Maryland’s Peter Morici, former chief economist of the U.S. International Trade Commission. “As the economy slows further, this figure will likely exceed 10 percent.”
Silicon Valley has been shedding jobs at a slower pace, with tech giants anticipating a continuing slowdown in their business. The most recent state jobs report showed unemployment in Santa Clara County at 6.5 percent and statewide at 7.7 percent. California and Silicon Valley may see some “pretty scary” unemployment numbers in months to come, Levy said.
Posted in Business, Economy | No Comments »
October 2nd, 2008
Credit Crisis Spreads a Pall Over Silicon Valley
According to a quarterly survey by Mark V. Cannice, director of the University of San Francisco Entrepreneurship Program, the confidence of venture capitalists has plummeted to the lowest level since the survey began in 2004.
“Investment in venture firms could dry up if the drought continues and venture firms cannot show returns,” said Ken Wilcox, chief executive of SVB Financial Group, the parent of Silicon Valley Bank.
Posted in Economy, Silicon Valley, Tech Business | No Comments »
October 2nd, 2008
The conventional view of terrorists is that they are focussed on political or economic gains. So a common strategy to prevent terrorism is to provide people with non-violent ways of achieving those goals. But Max Abrahms of Stanford has studied terrorist groups, and he concludes their motivation is not political gain.
The Seven Habits of Highly Ineffective Terrorists.
Terrorists, he writes,
- Attack civilians, a policy that has a lousy track record of convincing those civilians to give the terrorists what they want;
- Treat terrorism as a first resort, not a last resort, failing to embrace nonviolent alternatives like elections;
- Don’t compromise with their target country, even when those compromises are in their best interest politically;
- Have protean political platforms, which regularly, and sometimes radically, change;
- Often engage in anonymous attacks, which precludes the target countries making political concessions to them;
- Regularly attack other terrorist groups with the same political platform;
- Resist disbanding, even when they consistently fail to achieve their political objectives or when their stated political objectives have been achieved.
Abrahms has an alternative model to explain all this: People turn to terrorism for social solidarity. He theorizes that people join terrorist organizations worldwide in order to be part of a community, much like the reason inner-city youths join gangs in the United States.
Posted in Culture, Politics | No Comments »
October 1st, 2008
50 Reasons to Date a Geek
Just let me cling to my illusions, OK?
Posted in Culture | No Comments »
September 29th, 2008
According to Prof. Bill Dally, chair of the computer science department at Stanford, Wall Street’s collapse may be computer science’s gain.
The collapse of Wall Street may help make computer science and IT careers attractive to students who abandoned these fields in droves after the pop of the last big bubble, the dot-com bust of 2001.
“Many thought they could make more money in hedge funds,” Dally said. He said students are returning to computer science because they like the field and not because it can necessarily make them rich.
That’s right. Those kids better not believe they’ll get rich with a computer science degree.
If the dot-com meltdown wasn’t enough, offshore outsourcing also scared away students from technology. In 2004, Carly Fiorina, then CEO of Hewlett-Packard Co., summed up the offshore trend this way: “There is no job that is America’s God-given right anymore.” Fiorina is now an adviser to Republican Sen. John McCain in his bid for the White House.
Posted in Economy, Tech Business | No Comments »
September 25th, 2008
The end of the BSD
The dirty little secret of the late boom? Many of the people who succeeded most flagrantly did so not because they were great at figuring out ways to make huge amounts of money. Rather, they scored because they were great at figuring out ways to make small amounts of money and then magnified their returns through the massive use of debt.
The Securities and Exchange Commission this week issued an order banning the short selling of several hundred financial stocks. As a result, many hedge funds are pulling in their horns and running for safety. [...] The BSDs are investing like grannies who survived the Great Depression. Riding out the storm by parking assets in cash is a smart strategy for a hedge fund that has already scored big gains for the year. But most hedge funds haven’t. Earlier this week, it was reported that, globally speaking, only one in 10 hedge funds is earning performance fees—i.e., the 20 percent of the fund’s gains that the managers keep as compensation.
Posted in Business, Economy | No Comments »
September 23rd, 2008
Silicon Valley Barely Touched by Financial Crisis — So Far
The market for initial public offerings has been nearly closed for venture-backed companies this year, with only two public offerings of venture-backed technology companies so far. The financial crisis will not help that situation.
Posted in Economy, Silicon Valley | No Comments »