Expert Advice on Starting a Company in the Bear Economy

Last Updated Oct 15, 2008 6:42 PM EDT

Want to know what some of the world's most successful venture capitalists are telling the CEOs of the startups they've funded? Get profitable, no matter what it takes, and get ready to ride out a very long storm.

That's the gist of what Sequoia Capital honchos Michael Moritz, Doug Leone, Eric Upin and Michael Partner told the companies they've funded. Several tech-oriented sites picked up on the message, but the GigaOm post What startups can learn from Sequoia's Doomsday Meeting did the best job I've seen of putting it in context for entrepreneurs. It's another testament to why my former colleague Om Malik is one of the savviest technology journalists going.

I've picked highlights from a number of points made:

  • The economy will go almost into Rip Van Winkle mode -- recessionary cycles historically have averaged 17 years. This one was pegged at possibly 15 years by one Sequoia partner.
  • It's the credit markets that matter, not the equity markets.
  • Get to profitability pronto.
  • Tailor your cuts -- cut engineers if your product is ready, but not before. Cut spending wherever else you can. But don't cut PR or marketing unless it clearly isn't working -- you can't afford to seem to disappear.
  • Find some way to get and keep a year's worth of cash.
  • Throw out models based on the past -- they won't work.
There's more good advice in there (though as with all business self-help, not all of it is going to be easy to follow). Om is careful to say that Sequoia itself would not confirm the comments and that he thus has what might be only a partial reflection of the meeting, and perhaps not an accurate one. But the advice should hold for anyone trying to start a company.
  • Michael Fitzgerald

    Michael Fitzgerald writes about innovation and other big ideas in business for publications like the New York Times, The Economist, Fast Company, Inc. and CIO. He’s worked as a writer or editor at Red Herring, ZDNet, TechTV and Computerworld, and has received numerous awards as a writer and editor. Most recently, his piece on the hacker collective the l0pht won the 2008 award for best trade piece from the American Society of Journalists and Authors. He was also a 2007 Templeton-Cambridge Journalism Fellow in Science and Religion.