Updated: Sequoia Capital, arguably the smartest venture capital investor in business, is sounding the alarm and asking its portfolio companies to buckle down for what could be the worst economic downturn of their relatively short lives.
The fund organized a meeting yesterday where it invited entreprenuers/CEOs from its portfolio companies. The attendees were greeted by a cute image of a Grave Stone, with a message: R.I.P.: Good Times, my sources tell me.
I was able to confirm this with at least two sources. I am currently trying to nail down more details. Sequoia Capital declined to comment on the news.
The gathering was addressed by at least four speakers, including a brief introduction by Mike Moritiz. Doug Leone was another speaker. I am still trying to nail down more details of the two other speakers. A person who handles Sequoia’s public market investments is said to have talked to the startups. The message delivered to those in attendance was that things could get a lot worse than people think, and it will be a more protracted downturn. To give a historical perspective, Sequoia had a similar meeting back before the last bubble unraveled burst. We know how that turned out.
They want the companies to cut costs, to figure out way to survive and emerge at the other end of this downturn, which could last years. The speakers went through each functional area of the business and told the companies how to cut costs. By holding this special meeting, Sequoia is telling its companies to put survival strategies in place and figure out ways to outlast the broader market troubles.
Uber-investor Mike Moritiz told The Financial Times earlier this week: “It’s pretty clear that demand is going to soften across the board for every company – it doesn’t matter if you’re selling to consumers or companies.” Moritiz isn’t one to mince words, and is one of those few people who likes to get ahead of the fire and not fight it from behind.
Sequoia isn’t the only one advising its startups to tighten their fiscal belts and prepare for a gut-wrenching ride. Ron Conway, a well-known angel investor in the Valley who has invested in companies like Google, offered very sobering advice to his companies via an email earlier today.
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 an eye to 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. 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.
Folks this is bad news for Silicon Valley, which has been living in a bubble, assuming that it is going to weather the global economic storm without being impacted. We have been following this story since last year, pointing out that the tech is not an island.
[...] Leading Silicon Valley venture firm Sequoia held an emergency meeting yesterday to tell its portfolio companies to get ready for the worst, GigaOm is reporting. [...]
I’m not going to lie, that is daunting & scary to hear it from Sequoia who clearly know what they’re talking about. I think however, there was always going to come a time when this playground we called Web 2.0 came to an end and businesses with serious business models shone through. The ones without them – knuckle down and make some money…or clearly die.
I’m not surprised, but I think that startups should run very learn and be doing all of this anyway regardless of market forecast/conditions – especially if they’re funded.
oops – i mean “run very LEAN”
Om, insightful post. People have been wondering about how VC’s will react, and I think you’re right that this is a good indicator.
In a forest fire lots of trees burn, but not all trees. Scary times indeed.
I sat in meetings with several prominent VC’s and angels, showed a 1000+ user survey with 99.9% favorable responses in favor of paying subscription fees for a mobile service vertical market venture. One question was: “Are you making a Facebook Application?”Another was: “Why would start a venture with towing and automotive services as the target?”
Now you know why we are in trouble.
i think the metaphor is more like lions chasing zebra. the herd will be thinned, devil take the hindmost (= those with no business model / revenue).
VC-backed businesses are going to be under serious pressure that’s for sure. I guess this is the end of the Web 2.0 boom. On to the next big wave!
“bubble unraveled”? tsk tsk mixed metaphor.
Dave, I have to agree with Scoble — if only because the firm is named Sequoia and not Savannah
Dave, I think it’s more like a hundred lions chasing zebra. The herd will be decimated.
It follows. If you see the loss of wealth, imagine an equal magnitude impact to national income from a recession, and think of people’s lives scaled down in that proportion, a lot of the current value propositions will be obsolete.
It won’t be enough to deliver real value, it will have to be value relatively more essential to the core of people’s lives. And those lives might be quite a bit simpler.
On the other hand it could be a great time to do deep R&D if you have the funding and can wait long term for an ROI. It should be easier than usual to recruit the brightest minds…
Uh-oh. Start-ups will have to start developing legitimate business plans and actually execute upon their strategy to monetize. How horrible. This is good for tech, not bad.
[...] It’s the same advice, actually, that he gave in 2000 during the tech meltdown that was then happening in real time. Lower your burn rates to get at least 3 more months out of your current money, and raise money right now if you can. It’s very similar to what Sequoia (and other VCs, I’m sure) are telling their startups. [...]
It seems like startups still haven’t learned to run lean, contain costs and chase money.
shouldn’t be a surprise. ripple effects from the current mess are bound to touch the tech sector.
[...] To make you more nervous about how bad the outlook may be, read Om Malik’s ominous preliminary report on trouble in Silicon Valley. [...]
This is a PR stunt. When companies like Facebook go out and raise $300 million, or RockYou and Slide raise $50 million a piece, you know they were bulking up for hard times ahead. Sequoia knew about this, and told their companies about this, a long time ago. They couldn’t make that public though because they were saying the opposite to the Series A and B venture funds that gave their companies those war chests.
Now Sequoia will leverage this crisis towards more equity in companies that are looking for new rounds of investment right now.
This is all a God damn game for people who are going to be fine no matter what.
We saw this playout 8 yrs ago
Gloomy days ahead for web20
[...] Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble – GigaOM [...]
This guy was WAY ahead of the curve. The fact that the VCs are finally catching up to the boards is, um, typical.
http://tinyurl.com/6yvuzr
[...] It’s the same advice, actually, that he gave in 2000 during the tech meltdown that was then happening in real time. Lower your burn rates to get at least 3 more months out of your current money, and raise money right now if you can. It’s very similar to what Sequoia (and other VCs, I’m sure) are telling their startups. [...]
The next shoe to drop: VC’s will start withdrawing their money from startups where there is a bunch of cash left. Remember Kibu? I thought not.
That some trees survive is, yes, always the case.
And who is better insulated than the oligarchs? (Well, ok, the mafiosi … anybody been watching Russian markets?)
It comes down to fundamentals. (Karma, baby.) “Bubble” is almost too slight as statement of actuality … more like #matrix.
Bad sign.
Is your VC firm doing anything different?
[...] venture capital world has long been known is fast turning into a querulous hopelessness. To wit, the emergency gathering held at Sequoia Capital this week. It’s purpose: to prepare the firms portfolio companies for a protracted [...]
[...] 実はこのアドバイス、同氏が2000年に、当時起こっていたテクノロジー危機の最中にリアルタイムで話したのと同じものだ。資金の回転率を下げ、少なくともあと3か月間は現有資金でやりくりし、可能であれば今すぐ資金を調達すること。これは、Sequoia（他のVCもそうだと思う）がスタートアップに話していることとよく似ている。 [...]
[...] Om Share and [...]
while this is news, and important to talk about, we have to make sure that the positive of the situation also stays in focus: companies today are *so* much stronger than the web 1.0 bomb companies that blew up back in the day.
here is a good article on mashable about the need to stay positive in tech:
http://mashable.com/2008/10/08/leadership-fear-technology-economy/
Let’s try to get real here. What is before us is not like anything you or I have ever experienced or anticipated. People in the coming months and yes years are going to need shelter, and food, and heat to keep them warm, and more than that, to learn about how the financial systems have been and are still continuing be gamed. Web 2.0 apps for the most part are not essential to survival. Some are and will be critical to communicate for sure, but not this zealous obsession with social chatter. Even if someone is giving you money to pursue this stuff, it better damn well be focused on the essential to survival, not just social chit chat. Good luck.
[...] to reports of the meeting, first reported by GigaOm, and confirmed by VentureBeat, attendees were greeted by a gravestone with “RIP Good [...]
[...] them to hunker down. And now everyone notices that things may not be so peachy in Web 2.0-ville. GigaOm has the details and notes that the Valley is in for rough times. My question: What took Sequoia so long? Here on [...]
My guess is only the me 2 companies and mangers will feel the brunt.
As somebody else said maybe R&D will be back. I definitive will do my best, I’m tired of people telling me it can’t be done. When they mean they can’t do it.
Makes me wonder how many people like me left the valley to do some hard work. Maybe we’ll be back after the fluff is gone.
This is bad news for Silicon Valley? Why? Who cares what Sequoia thinks?
It may be bad news for their portfolio companies, however. In the last downturn, after the bubble, they completely cut off funding to many existing investments.
I guess they had the foresight to know which would succeed. Oh wait, they invested in the others also.
typo, his name is Mike Moritz not Mortiz > http://www.sequoiacap.com/people/michael-moritz/
[...] Sequoia Capital (via GigaOM) [...]
[...] over to Gigaom and read their article about Sequoia ringing the alarm for Silicon Valley. Sounds like even the [...]
@ Ralph Pina … thank you dear sir for helping me see the light here. I corrected the spellings.
@Dave and @Eric Eldon thanks for the banter. some light relief was in order i guess.
@gw …. this is pretty big sign and yes we in the valley are still not facing up to it. Regardless your comment is pretty spot on.
[...] calm, freak everyone out with their own passive aggressive panic. If you don’t believe me, Sequoia and Uber angel investing guru Ron Conway are just now writing letters to all their CEO’…. I mean [...]
@Ben Tremblay above: As a Russian I would like to point out that our economy is not all about mafia these days any more. Besides, the fact that we were way too willing to enter the international economics has made Russia much less insulated that we would not want to be so our market is far from healthy either (remember, they call it a global crisis already).
[...] Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble Posted by Ganesh S Bhat in Current Affairs at 23:01 | Comments (0) | Trackbacks (0) Karma for this article: [...]
Run Forest Run!!!!!
It will be good to learn some lessons’ from history. Some that I can highlight are 1) In 1932 the DJIA came down from 334 to 42 pts in less than a year but went back up to 172 within the following year or so. 2) Analyze the economic KPI’s and you will see productivity increasing year to year. Hence the basis for economic growth is still intact. 3) Political blunders and run away greed on Wall Street really got out of control this time, but the free market system put in a correction, though a little late. 4) Finally invention and innovation has massive capital support in the US and now world wide, so look out for opportunities like you have never seen before. Conclusion, this will be a period of pain stretching about 18 months, there after you will see the DJIA roar towards 20,000 by 2012-13! Just extrapolate from the history and don’t listen to Sequoia.
[...] you look down on your ticket comparing your numbers to last night’s numbers. Then you sigh. Game over. You just lost your [...]
[...] industry. So it is no wonder that the players in the industry are more than worried today now that Om Malik reports that Sequoia held a meeting for founders of its portfolio companies to talk about the economic [...]
[...] venture capital world has long been known are fast turning into a querulous hopelessness. To wit, the emergency gathering held at Sequoia Capital this week. It’s purpose: to prepare the firm’s portfolio companies for a protracted [...]
[...] wildly, and industries all over the place are in trouble. You know it’s bad when the Sequoia Capital says it’s bad. Even the folks that make staples like aluminum are having [...]
[...] stream of news and blog posts on the current financial crisis. Om Malik has just written a good one here. I wasn’t sure if I should be writing about it since I am not a financial expert (I spend and [...]
I know of non-dilutive grants from the government supporting engineering headcount to encourage startups to establish engineering centers in Singapore. Does this sound interesting in such times?
You basically plonk a team in Singapore, pay their payroll out of Singapore, and every 3 or 6 months, get reimbursed up to 50% of their base salary. This might be a good way to stretch startups’ existing venture-backed dollars in such tough times.
Does it makes sense? Thoughts guys?
[...] reported by Om Malik of GigaOm in a piece titled “Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble,” for example, Sequoia Capital–one of tech’s most powerful and successful VC [...]
Here in Israel, VCs tell me they are waiting for opportunities to make aggressive investments as some funds with a lot of reserves get great deals at low valuations.
Also – some will shift their investment models to fit the times – seed funds will make later stage investments in distressed B/C round firms that are close to profitability. They think they can make a killing..
Others are more interested in putting together bay area real estate deals..
Only thing to “fear is fear itself”. Even if 20% of 5 Trillion mortgages made from 2003- 2008 are bad, Fed has enough money to revive the credit flow.
Media is spreading both fear and greed to the extremes. Certainly there is bubble in the blogosphere, what is your differentiation with other popular blogs (I dont need to name) OM ?
[...] economic downturn is started to reach into the venture-capital world as well. Sequoia just sounded the alarm bell, signaling that bad times are ahead for their portfolio [...]
[...] these statements, but the harsh reality of the economic climate is about to bite, if not already. Sequoia Capital, one of the leading VCs in the Valley, has started to make sure it’s portfolio understands [...]
[...] It’s the same advice, actually, that he gave in 2000 during the tech meltdown that was then happening in real time. Lower your burn rates to get at least 3 more months out of your current money, and raise money right now if you can. It’s very similar to what Sequoia (and other VCs, I’m sure) are telling their startups. [...]
[...] to GigaOM Sequoia yesterday called their portfolio company CEOs to a meeting, greeted them with the above [...]
[...] Conway (reconocido inversor angel) y Sequoia (reconocido VC) coinciden en que, debido a la crisis financiera, se vendrán tiempos dificiles para [...]
How pessimistic to be introduced to a meeting with a grave stone. I guess they want to get the point across, but I would have done it differently.
[...] FriendFeed: Sequoia Capital (the venture capitalists behind Yahoo and Google, to name just two), have called off the tech boom and told their companies to start preparing for the [...]
[...] dazu gibt es hier. Technorati tags: silicon valley, finanzkrise, vc « Q&A mit Mark [...]
[...] on October 8, 2008, “Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble” here. For me, the most interesting point in the write up was this statement: “R.I.P. Good [...]
[...] has no drastic effects on the value of our portfolios in the long-term and that it is far from the end of a good times for [...]
[...] for the downturn Image by Jeroen Krah via FlickrAs austerity takes over from ostentation, sensible investors are telling their companies to knuckle down and reduce burn. Hat, tip [...]
All of this is good advice from Sequoia, and I think most serious businesspeople are thinking this way anyway.
Since we all know that the current situation is a combination of fundamentals and confidence, let’s not forget to focus on confidence. We survived 2000, we can survive this.
Disciplined companies with good leadership will still be around in 24 months, just like last time. If not, we have a larger problem, that probably no amount of money or wisdom can easily address.
[...] Sequoia Rings the Alarm Bell: Silicon Valley is in Trouble (via GigaOm). [...]
[...] Il racconto di GigaOm (anche per il credit immagine) [...]
A recession is when the real entrepreneurs emerge. Those who think it would be “neat to start a company” generally prefer the safety of a stable job during a recession. Google emerged during the last recession. While the stock has suffered recently, it remains one of the most successful tech companies ever. Here are some good tips to help startups survive the economic downturn http://tinyurl.com/4bkvle .
[...] just about every economic sector worldwide right now. From the Inquisitr to CNet, Paul Kedrosky and GigaOM everyone is saying the party is over. For many of the smaller companies that are not in a solid [...]
Sequoia is an investor in my company http://www.fon.com and what they did is what everyone in the financial community is telling companies large and small. To tell them to lay off 5% to 20% of their workforces and do more with less cause demand will shrink almost as fast as investor patience.
[...] the “good times are over” bell for their portfolio companies, as my friend Om Malik is reporting on his blog (other venture capitalists are sounding a similar warning, says Mike Arrington). My only question [...]
[...] http://gigaom.com/2008/10/08/sequoia-rings-the-alarm-bell-silicon-valley-in-trouble/ [...]
A MUST read for any startup looking to not only service, but prosper during the upcoming downturn;
http://bit.ly/LSdFn
http://www.twitter.com/A_F
[...] Del.icio.us Reddit Email This no ratingsLogin to Rate Sequoia Capital gathered its startups together on Tuesday for an emergency meeting about the economic downturn. When the startups arrived, GigaOM [...]
[...] of noise today, RIP Good Times, IT’S OVER! POP GOES THE BUBBLE, Sorry, Startups: Party’s Over etc. I [...]
For small, self-funded startups looking for capital right now, this financial crisis is a real kick in the nuts. Bad timing aside, as it is what it is and no level of pouting will change that for anyone, it will be interesting who can weather the storm and come out the other side. In fact I think that lean companies that are driven on passion and don’t have the responsibility of large investment hanging over their heads, may in fact do better. Innovation will continue as it has. One or two people (with possibly more time on their hands) making new stuff. I guess it depends on how long that passion can last. You can’t eat passion and it rarely pays the rent by itself.
It will separate the true business people willing to do what’s necessary to survive and prosper from the entrepreneurs with great ideas and no business plan. In fact, people will be going out less and probably on the internet more, so there are some interesting possibilities out there.
[...] aufpassen. Denn: Die Banken- und Finanzkrise hat nun auch das Silicon Valley erreicht. Wie Om Malik auf seinem Blog GigaOm berichtet, hat unter anderem der VC Sequoia (Google, ebay, etc.) die [...]
[...] morning I read Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble. It’s clear that raising money is going to become more difficult. I have a client who raised [...]
Looks like Ron Conway gave Om an exclusive preview of his email few weeks before general release. Om had good timing in raising money for his own venture. Congrats! And hope you are managing your stress better this time.
[...] man die Finanzkrise betrachtet. Ich auch. Laut Giga-Om wird es (natürlich) auch die Internet-Szene erfassen. Daher mal ein paar Hintergrund-Infos zu [...]
[...] Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble [Giga Om] [...]
Food, Fear and Sleep
The more you increase it the more they increase
– small east Indian Proverb
I say Chill Out!
[...] Source [...]
[...] by internet_startups on October 09, 2008 Internet Startup News According to Om Malik, ‘Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble‘, suggesting “Sequoia Capital, arguably the smartest venture capital investor in [...]
The key is to make good decisions in a state of (real or imaginary) panic and chaos. One foot in, one foot out.
http://ad-village.com
[...] with their portfolio companies advising them to “tighten their belts” according to Om Malik of GigaOm. The message delivered to those in attendance was that things could get a lot worse than [...]
[...] The alarm bell is rung by Sequoia [...]
[...] Om Malik reports [...]
[...] Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble Sequoia Capital, arguably the smartest venture capital investor in business, is sounding the alarm and asking its portfolio companies to buckle down for what could be the worst economic downturn of their relatively short lives. _____________ Source: GigaOM [...]
Prepare for 3-6 months without additional financing? That’s no time at all. Obviously Conway is talking to companies that are incredibly tight with the VC community. They basically run their businesses on venture money.
If you are not plugged into the VC lifeline, the advice would be: structure your company to survive for 24 months without additional financing. That demands a hard look at your baseline cash flow, cash reserves, and costs.
[...] Ron Conway y Sequoia Capital le dicen a su portfolio que los tiempos cambian y el financiamiento se va a cerrar tanto como en el [...]
IF the liquidity fear based crunch can be eased by the Fed PRIOR to business demand destruction, THEN this will not destroy the base that the future apps will need to suceed.
ELSE if
The Fed/Central Banks fail in un-assing the credit liquidity, and job/business demand destruction occurs, then infra-structure rebuilding and consumer markets have to be regenerated. That is the LONG WINTER that sequoia is looking at.
END IF
[...] buckle down for what could be the worst economic downturn of their relatively short lives.” According to Om Malik: They want the companies to cut costs, to figure out way to survive and emerge at the [...]
[...] is nosediving, now that hoarding is becoming part of peoples’ routines, now that even high-flying VCs are getting nervous and battening down the hatches, I have to wonder: is this really the right moment for Apple to [...]
[...] to look dismal, the reverberations are being felt within the tech sector. As our parent blog GigaOM reports, the venture capital firms are starting to get antsy about whether Silicon Valley can continue [...]
[...] Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble [...]
[...] Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble: The fund organized a meeting yesterday where it invited entreprenuers/CEOs from its portfolio companies. The attendees were greeted by a cute image of a Grave Stone, with a message: R.I.P.: Good Times, my sources tell me… Read more on GigaOM. [...]
[...] Tras este preámbulo os preguntaréis qué tiene que ver todo esto con las inversiones en internet. Me asusta pensar que los excesos que se han producido en el mercado inmobiliario e hipotecario se hayan extendido también a las inversiones de internet. Por eso me pregunto de dónde salía el dinero que el capital riesgo ha estado invirtiendo en cantidades importantes en empresas de internet? y sobre todo las inversiones en Estados Unidos. Si el dinero era suyo estaremos ante procesos de inversión lógicos, como el que realiza cualquier inversor que compra acciones en bolsa y espera a que suban para vender. Pero qué pasa si el dinero que invertían era prestado? pues lo que pasa es que estamos ante un grave problema. Muchos de los planes de negocio de nuevas empresas de internet se basan en la realización de varias rondas de inversión hasta logra el break even y otros tantos de esos planes de negocio se basan en llegar a obtener beneficios en una situación del mercado favorable, no sumidos en una crisis mundial (con crisis de inversión publicitaria entre otras cosas). Si el dinero era prestado, ahora ya no se presta más dinero así que se acabaron las rondas de financiación. Algunos fondos e inversores en USA ya han dado la voz de alarma. [...]
What happens to open source in this downtownturn?
http://www.gandalf-lab.com/blog/2008/10/let-real-test-of-open-source-business.html
[...] I got on a plane to Martha’s Vineyard.) And I don’t agree with bloggers who say Silicon Valley has been living on a bubble, thinking it won’t be affected by the crash. But posting videos of your fun Cyprus vacation [...]
[...] the economy are going to impact just about everyone in the sector. It is the latest sign that the downturn is going to temper the mood in always-upbeat Silicon [...]
[...] sector has found its way to the Silicon Valley crowd. Warnings from investment stalwarts such as Sequoia Capital and Ron Conway have almost single-handedly ended the exuberant atmosphere among the entrepreneurial [...]
[...] Last night I reported on a special meeting held by Sequoia Capital for its portfolio companies, warning them about the fiscal hurricane that was going to hit them, and how they’d better figure out ways to survive what could be a big downturn. [...]
@Niraj J.
If the “open source” in question has a source of cash, things will be ok, otherwise it will be closed source.
Here are notes from the meeting:
Today, Sequoia Capital hosted a mandatory CEO All-Hands Meeting on Sand Hill Road (where else?). There were about 100 CEO’s in attendance and let me tell you, the mood was somber. I’m not one to perpetuate doom and gloom or bad news, but let me underscore this for you: We are in a serious economic downturn and this is just the beginning. Immediate, decisive and swift action is required, along with frugal, day-to-day management of expenses and our business is required.
***Here are my notes from the meeting. Keep this note in your in-box and read it every day. I’m serious folks, this is for our survival.***
Speakers:
· Mike Moritz, General Partner, Sequoia Capital (he moderated the speakers).
· Eric Upin, Partner, Sequoia Capital (Eric ran the $26-Billion Stanford Endowment Fund and knows a few things about Economics and investing.)
· Michael Beckwith, Sequoia Capital (Michael was recruited to start Sequoia’s very first hedge fund, coming from Maverick Capital and Robertson Stephens. I know him from my BEA days.)
· Doug Leone, , General Partner, Sequoia Capital
Slide projected on the huge conference room screen as people assembled inside the conference center to take their seats: a gravestone with the inscription: RIP, Good Times.
Mike Moritz:
· The only time Sequoia’s assembled all CEO’s like this was during the dot.com crash.
· We are in drastic times. Drastic times mean drastic measures must be taken to survive. Forget about getting ahead, we’re talking survive. Get this point into your heads.
· For those of you that are not cash-flow positive, get there now. Raising capital is nearly impossible if you’re too far off of cash flow positive.
· There will be consequences for those who hesitate. Act now.
Eric Upin:
· It’s always darkest before it’s pitch black.
· Survival of this storm means drastic measures must be taken now, so you will have the opportunity to capitalize on this down turn in the future.
· We are in the beginning of a long cycle, what we call a “Secular Bear Market.” This could be a 15 year problem. [many slides on historical charts of previous recessions, averaging 17 year cycles.]
· The credit market [versus the Equity markets] are the issue and will take time to recover.
· Inflection point: Make changes, slash expenses, cut deep and keep marching. You can’t be a general if you turn back.
· This is a global issue and not a ‘normal’ time.
· There is significant risk to growth and your personal wealth.
· Advice:
o Manage what you can control. You can’t control the economy, but you can control everything else.
§ Cut spending. Cut fat. Preserve Capital.
§ Don’t trust your models and spreadsheets. All assumptions prior to today are wrong.
§ Focus on quality.
§ Reduce risk.
Michael Beckwith:
· Note: Michael had a lot of slides that were charts, data points and comparisons.
· A “V” shaped recovery is unlikely [√]
· Cuts in spending will accelerate in Q4/Q1. Look at eBay—this is just the beginning.
Doug Leone:
· This is a different animal and will take years to recover.
· Getting another round if you’re not profitable will be rough.
· Do everything possible to get to cash flow positive. Now.
· Nail your Sales and Marketing message.
· Pound your competitors shortcomings. They’re hurting and they will be quiet. Take the offensive.
· In a downturn, aggressive PR and Communications strategy is key.
· M&A will decrease dramatically and only lean companies, with proven sales models will be acquired.
· Spectrum discussion:
o Capital Preservation ß———————————-à Grab Market
o Everyone should be far to the left (capital preservation)
· Requirements of our companies:
o You must have a proven product
o You must cut expenses. Now and deep.
o Your product should reduce expenses and drive revenue [NOTE: I want to revisit this with the Management team. Our solution does both, we need to quickly and crisply define the sound bite here.]
o Honestly assess your solution vs. your competitors.
o Cash is king [have you gotten this message yet?]
o You must get to profitability as soon as possible to weather this storm and be self-sustaining.
· Operations review:
o Engineering: Since you already have a product, strongly consider reducing the number of engineers that you have.
o Product: What features are absolutely essential? Choose carefully and focus.
o Marketing: Measure everything and cut what is not working. You don’t need large Product Marketing, Product Management teams.
o Sales & Business Development: What is your return on this investment? The Valley has gotten fat with Sales people: Big bases, big variables. Cut base salaries on sales people, highly leverage them with upside (increase variable) and make people pay for themselves via increased sales productivity. Don’t add sales people until you’ve achieved your goals with sales productivity. Be disciplined.
o Pipeline: Scrub the shit out of it and be honest with yourself.
o Finance: Defer payments, what is essential? Kill cash burn.
· Death Spiral (Nobody moves fast enough in times like these, so get going and research later.)
o The death spiral sucks you in, you’re in it before you know it and then you die.
o Survival of the quickest.
o Cutting deeper is the formula for survival.
o You should have at least one year’s worth of cash on hand.
o Tactics:
§ Assess your situation. Drop your assumptions, start with a blank page and start zero-based budgeting.
§ Adapt quickly
§ Make your cuts
§ Review all salaries
§ Change sales comp
§ Bolster your balance sheet—if you can add $5M to your coffers, take it and save it.
§ Spend like it’s your last dollar.
· Get Real or Go Home.
[...] will be affected, but actions are starting to be taken. In one of the most alarming examples, GigaOm reports today, that Sequoia Capital, is telling its portfolio companies to buckle down, and illustrated the point [...]
[...] downturn of economy may be longer than expected, thus many years. If it ever recovers fully… Gigaom has a good article. Angel investor Ron Conway has the same [...]
[...] Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble – GigaOM (tags: sequoia vc economy startups) [...]
[...] the Dow in free fall, venture capitalists apparently are coming to grips with reality. Om Malik is reporting that Sequoia Capital this week brought in a bunch of its startups CEOs to let them [...]
[...] [Sequoia Partners distributed a tough message to its CEOs earlier this week, essentially calling on t...] This is an important message as all start up companies must fight their way through some tough economic times ahead. Please read [what Sequoia wrote] and start considering how the world has suddenly changed and how it will affect each of you. The message is: save cash, focus on your core business, build revenues (or get to them quickly) and establish your value proposition now. Don’t waste money on nice to haves or crazy experiments. Discipline your team. Stay lean and tight. [...]
[...] Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble Updated: Sequoia Capital, arguably the smartest venture capital investor in business, is sounding the alarm and asking [...] [...]
As a Sequoia portfolio company, we actually had a slightly different take on this meeting. Read more here: http://www.appirio.com/blog/2008/10/chris-barbin-theres-lot-of-talk-today.php
[...] morning I read Sequoia Rings the Alarm Bell…. It’s clear that raising [...]
[...] לתוכניות הרדיו על מלחמת יום כיפור, הגיחו הדווחים על ישיבות ה”בור” בסיליקון ואלי – אצל רון קונוויי וסקוייה. [...]
[...] I got on a plane to Martha’s Vineyard. And I don’t agree with bloggers who say Silicon Valley has been living on a bubble, thinking it won’t be affected by the crash. But posting videos of your fun Cyprus vacation [...]
[...] 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 GigaOm [...]
[...] Higginbotham, Thursday, October 9, 2008 at 9:01 PM PT Comments (0) Venture firms are sounding the alarm over what this current downturn might mean for their portfolio companies — and it’s not [...]
[...] Sequoia Capital and Ron Conway communicated with their portfolio companies to guide them through troubled times. [...]
[...] Malin reports on Sequoia Ventures sounding alarm bells for Silicon Valley start-ups. Sequoia asks its portfolio companies, reports Om, to buckle down for what could be the worst [...]
The majority of 2006-2007 vintage funds will likely lose money – that’s what makes the VCs nervous. The numbers on 1999-2000 vintage funds were ghastly.
[...] Yesterday Sequoia Capital and Ron Conway communicated with their portfolio companies to guide them through troubled times. [...]
[...] – Start-Up News Posted by internet_startups on October 10, 2008 Internet Startup News Yesterday Sequoia Capital and Ron Conway communicated with their portfolio companies to guide them through troubled times. [...]
[...] Internet-Startups haben es wegen der Finanzkrise schwer, Wagniskapitalgeber zu finden – oft springen Business Angels ein. handelsblatt.com, gigaom.com [...]
[...] firms are sounding the alarm over what this current downturn might mean for their portfolio companies — and it’s not [...]
[...] en GigaOM que Sequoia Capital ha llamado a cuentas a unos cuantos CEOs de su cartera de participadas para [...]
[...] Capital, 1 van de bekendere investeringsbedrijven in Amerika, heeft eerder deze week een geheime meeting gehouden. Tijdens deze meeting was veel aandacht voor de algehele malaise en de [...]
[...] 昨日（米国時間10/8）はSequoia CapitalとRon Conwayが投資先企業に、困難な時期を乗り切るための指針のメッセージを送った。今日はBenchmark Capitalがこの戦列に加わり、ある筋によればパートナー総代のBill Gurleyが投資先企業たちにメールを送った（今年の初めのGurleyと新パートナーMatt Cohlerのインタビュー記事を呼んでみてください）。 [...]
For a look at where the economy is heading check this out:
http://www.robertphoenix.com/content/?p=204
[...] when it starts hitting home at the foundation of the internet entrepreneur scene, as mentioned by Om Malik, all the start-ups need to listen [...]
[...] similar note to his portfolio companies. GigaOm reports that Sequoia Capital called an all-hands, emergency meeting with its portfolio CEOs to walk through a recommended plan of action. I have received copies of [...]
It’s interestiong also how will some startups get money – and also about google adsense too.. google make it more and more difficult to work with it…
[...] Sequoia’s meeting of CEOs Tuesday to access and expound the meaning of survival. Based on the Gigaom exclusive “Sequoia Rings the Alarm Bell…” we here at Flypaper.tv have gathered [...]
We sent out our reporters to find out more – here are some additional details from those who were at the actual meeting:
http://www.flypaper.tv/2008/10/10/inside-scoop-sequoias-meeting-of-ceos/
[...] die jetzt nach Startkapital suchen.” Könnte stimmen, denn erste Venture Capitalists warnen ebenfalls. Einen Schritt weiter geht Michael Arrington: Er verkündet auf TechCrunch das unwürdige [...]
[...] the last eight years in a row. And like a growing number of highly respected venture capitalists, like Sequoia’s Michael Moritz, Haque is bracing for the [...]
[...] the ever-so-bright VC’s thought to put out a memo to “the world” about tough times ahe…. Some are even predicting a forthcoming Apocalypse for Web 2.0 [...]
[...] existiert. Banken, sowie der Finanzsektor haben anscheinend immer mehr Liquiditätsprobleme. Laut Om Malik, sollten alle Startups aufpassen, denn die aktuelle Finanzkriese könnte auch für sie gravierende [...]
[...] existiert. Banken, sowie der Finanzsektor haben anscheinend immer mehr Liquiditätsprobleme. Laut Om Malik, sollten alle Startups aufpassen, denn die aktuelle Finanzkriese könnte auch für sie gravierende [...]
[...] capitalists are inciting Silicon Valley companies to switch to survival tactics. Om Malik on GigaOm writes that Sequoia Capital, arguably the smartest venture capital investor in business, is [...]
[...] 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 [...]
[...] interesante es la referencia que hace Om Malik (entrada 1 y entrada 2), en su blog Gigaom, a la reunión convocada por la entidad de VC Sequoia en la que [...]
[...] Valley has been abuzz over an emergency meeting that Sequoia Capital called for its portfolio companies on Tuesday. VentureBeat now has the slideshow presented at that [...]
[...] for venture-backed start-ups that Sequoia Capital gave to its portfolio companies this week. GigaOm’s Om Malik had a nice take on the story yesterday; VentureBeat has posted the PowerPoint slides from the Sequoia presentation, and I’ve [...]
Wealth comes from natural assets multiplied by intelligence and labor.
In other words, you can not spend your way to riches, as consumers have been trying to do this past decade, you have to create the wealth yourself.
Now, as we re-balance, we will have to start making things, Manufacturing our own wealth again. We have seen what can be built, we want it, we know what we as a nation did before, and so we will start to do it again. The real entrepreneurs will indeed emerge, defying the nay sayers, and will again make America Great!
We will do it precisely because we, the ones others call crazy, ARE FREE to do so!
And when you have a solid idea, people, be it Venture Capitalists or the guys next door, WILL fund it. They will find it because they KNOW what AMERICA has done, and can do again!
Remember, peasants are people who vote with their feet. They are still voting for America whenever they can.
[...] what can start-ups do right now? Well Ron Conway, Benchmark Capital, and Sequoia have pretty clear ideas, as do any number of bloggers and pundits. But honestly the two most [...]
[...] what can start-ups do right now? Well Ron Conway, Benchmark Capital, and Sequoia have pretty clear ideas, as do any number of bloggers and pundits. But honestly the two most [...]
[...] Malik s pomocí svých zdrojů na GigaOM odhalil informace o srazu Sequoia Capital, na který tento zřejmě nejceněnější technologický venture [...]
[...] the web crowd to froth itself into a tizzy talking about the coming Silicon Valley slowdown. Led by Sequoia Capital, the clarion call is for cutting costs, firing employees, reducing burn rate, and trying to extend [...]
[...] on London’s ExCel Centre for the Future of Web Apps 2008 conference this week, and while the economic crisis has already reached Europe, the fear clearly hasn’t reached its startup [...]
[...] se ha hablado ya de la presentación que hicieron los de Sequoia Capital a sus participadas titulada R.I.P.: Good times, en la que hablaron sobre la [...]
[...] Foundation Capital General Partner Adam Grosser sent the email on Sep. 29, about a week before angel investing big-shot Ron Conway sent his SOS and Sequoia Capital held their now infamous come-to-jesus meeting. [...]
[...] own — Sequoia Capital, among the smartest and most rational investors in the world — told its portfolio companies to cinch their belts tighter than ever, all hell broke [...]
[...] a few people are talking about the tombstone Sequoia showed to their portfolio CEOs last week. We can’t argue with the message (either Halloween or [...]
[...] own — Sequoia Capital, among the smartest and most rational investors in the world — told its portfolio companies to cinch their belts tighter than ever, all hell broke [...]
[...] sequoia [...]
[...] : Good Times Jump to Comments The good times are over, the partners of Sequoia Capital are telling the entrepreneurs they fund. The VCs are telling their [...]
We all knew this was coming.Now lets think of getting over the troubled times.
-Nikhil
[...] swoje miliony od funduszy inwestycyjnych. Przestało być bajecznie więc zaczęto lamentować. Sequoia Capital bije na alarm i tnie koszta, a Seesmic zwolnił już 7 [...]
[...] sono: tagliare i costi, cercare di arrivare subito ai profitti e spendere ogni dollaro come fosse l’ultimo. Sopravviverà solo chi sarà più veloce a tagliare le spese. Bisogna essere realisti o meglio [...]
[...] capitalists are worried and urging their portfolio companies to enter survival mode. The layoffs have started. Michael Arrington has [...]
[...] Malik reported yesterday on his blog that Sequoia brought it’s portfolio together this week and gave them a talk about cutting costs and…. Ron Conway sent an email to his portfolio suggesting to them that they cut expenses so that they [...]
[...] Malik, one of the few uber-A-listers I haven’t met or hung out with yet, has a fantastic post about the economy, VC Funding and start ups. With the economy heading so completely south, start [...]
[...] of New York Angels. In light of the gyrations in the world’s capital markets, and particularly a Doomsday meeting that Sequoia Capital was reported to have had recently with their portfolio companies, Alan felt [...]
[...] Om Malik had written last week that Sequoia held a meeting of all the entrepreneuers/CEOs of its portfolio companies and advised them to tighten their fiscal belts. Attendees were greeted with an image of a Grave Stone, with the following message: “R.I.P.: Good Times“. [...]
[...] New York Angels. In light of the gyrations in the world’s capital markets, and particularly a Doomsday meeting that Sequoia Capital was reported to have had recently with their portfolio companies, Alan felt [...]
[...] burst! Situation is as bad; actually worse. What with Sequoia starting presentations to CEOs with RIPs and Benchmark echoing the sentiment. It does’nt really matter though that Sequoia raised more [...]
[...] the U.S. settles into what some predict is Depression 2.0, we are at the end of Web 2.0. Not Web 2.0 the technology – that’s still just at its [...]
[...] Om Malik had written last week that Sequoia held a meeting of all the entrepreneuers/CEOs of its portfolio companies and advised them to tighten their fiscal belts. Attendees were greeted with an image of a Grave Stone, with the following message: “R.I.P.: Good Times“. [...]
[...] companies. The tagline? “R.I.P.: Good Times”. You can check out this write-up on the GigaOM blog. Here’s an excerpt: They want the companies to cut costs, to figure out way to survive and [...]
[...] Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble GIGAOM Sequoia Capital, arguably the smartest venture capital investor in business, is sounding the alarm and asking its portfolio companies to buckle down for what could be the worst economic downturn of their relatively short lives.The fund organized a meeting yesterday where it invited entreprenuers/CEOs from its portfolio companies. The attendees were greeted by a cute image of a Grave Stone, with a message: R.I.P.: Good Times, my sources tell me.I was able to confirm this with at least two sources. I am currently trying to nail down more details. Sequoia Capital declined to comment on the news. Source> [...]
[...] already raised by lowering their “burn rate.” Angel investor Ron Conway, for example, sent his portfolio companies an email advising them to “lower [their] ‘burn rate’ to raise at least 3-6 months or more [...]
[...] portfolio companies. The tagline? “R.I.P.: Good Times”. You can check out this write-up on the GigaOM blog. Here’s an excerpt: They want the companies to cut costs, to figure out way to survive and [...]
[...] investor Ron Conway, for example, sent his portfolio companies an emai… advising them to “lower [their] ‘burn [...]
[...] already raised by lowering their “burn rate.” Angel investor Ron Conway, for example, sent his portfolio companies an email advising them to “lower [their] ‘burn rate’ to raise at least 3-6 months or more [...]
[...] they’ve already raised by lowering their “burn rate.” Angel investor Ron Conway, for example, sent his portfolio companies an email advising them to “lower [their] ‘burn rate’ to raise at least 3-6 months or more of funding [...]
is off-shoring going to be silver bullet for this problem ? It might not be, but it will definitely help reduce operational costs for these startups.
http://www.confiz.com
your offshore development partner
Here is the entire presentation from that evening http://budurl.com/anem
[...] Click here to read more about this presentation. Share and Enjoy: [...]
[...] with, since we’re completely self-funded, we’re not worrying about reassuring anxious VCs or angel investors. We don’t have any non-founder employees (and we’re not paying [...]
[...] Consejos de Sequoia VC para sus startups participadas por Om [...]
[...] venture capital My favorite ad network is hitting some rough times thanks to the economy as Sequoia Capital asking its companies to buckle down and prepare for the [...]
[...] now, you’ve probably heard about the grim tidings from VC meetings this month. If you haven’t, well, let’s just say your investors would like a [...]
[...] Sequoia capital refused to officially comment the meet it was reported in tech world across blogs (Gigaom broke the news) and news sites. It has been reported that invitees were greeted to the meeting with [...]
[...] czasami ulegam takim stanom) ale faktów się nie oszuka. Wielcy z VC właśnie biją w tarabany i radzą (za darmo!), że kryzys już zbiera żniwo, że trzeba zaciskać pasa i zacząć w końcu zarabiać [...]
THE AMERICAN GOVERNMENT CRISIS
We the American people can and will, out of desperation take care of this crisis without any government so called help.
If the government put a 6 month freeze on foreign imports, or if they passed a bill that balanced our trade, such as if a foreign country only allows us to send 2 billion dollars worth of goods to their country, then in turn they are allowed to send only 2 billion dollars worth of goods to our country. You know balance the trade!
You and I know this is not going to happen because the rich want a one-world economy and we have a useless congress with a 15 % approval rating. This means that 85 out of 100 Americans think all of congress should be FIRED! We are powerless here.
However Washington, we the little American people have a surprise for you! What you will not do because you are owned and controlled by the lobbyist, we the little American people will do it for you. We definitely don’t need you!
We will stop buying foreign made products and ( you can not stop us ). Within days Wall Mart and others will be full of CHINA AND OTHER COUNTRIES goods that they can’t sell! Within 6 months, millions of good paying American jobs will be created to fill the void with American goods. Again Washington ( you can’t stop us ) !
American little people! I beg you, If it doesn’t say AMERICAN MADE—–DON’T BUY IT! Within 6 months you will have a good job, a good home, be able to pay your bills, and create secure savings! The best thing about this is ( no one can stop us ) .
AMERICAN MADE—AMERICAN MADE—AMERICAN MADE—AMERICAN MADE. Let’s see if this gets Washington’s attention! To Washington, we don’t count!
JOE BILL JONES—A little AMERICAN.
[...] Материал сайта GigaOm от 10 октября 2008. [...]
[...] du web faite par les investisseurs américains, avec en chef de file Sequoia (voir l’article disponible sur GigaOm), la question de changer le nom de la conférence a été posée à Tim O’Reilly. La réponse [...]
[...] buying, and corporations are putting spending on hold. As such, venture firms have been sowing panic among their portfolio companies, telling them to cut early and cut often. The resulting layoffs are already filtering through the [...]
[...] our meeting had been planned several months ago, the fact that it came on the heels of some highly publicized admonishments by certain VCs to the CEOs of their portfolio companies to slash costs in order to survive the financial crisis [...]
[...] Sobrevivir a la crisis (II): Aguantar tres años sin financiación En estos momentos ninguna start-up puede sobrevivir si depende de financiación externa (ya sean bancos o inversores). Y va a seguir [...]
[...] obit was also carried on Om Malik’s blog GigaOm and in the LA Times. This was in an article in the Financial Times [...]
[...] http://gigaom.com/2008/10/08/sequoia-rings-the-alarm-bell-silicon-valley-in-trouble/ [...]
[...] The global economic downturn has started to take its toll on Silicon Valley, especially since the news of an emergency meeting Sequoia Capital held for its entrepreneurs, asking them to buckle up for the nausea inducing ride that lay ahead of them. In the weeks that [...]
[...] many entrepreneurs who saw the now-famous “Sequoia deck” unfortunately took its conclusions to be a tenet of truth and acted on it — perhaps too [...]
[...] global economic downturn has started to take its toll on Silicon Valley, especially since the news of an emergency meeting Sequoia Capital held for its entrepreneurs, asking them to buckle up for the nausea-inducing ride that lay ahead of them. In the weeks that [...]
[...] Om October 8, 2008 | jason | 1tinyComb, yahoo [...]
[...] Malik | Tuesday, December 2, 2008 | 10:24 PM PT | 0 comments A few months ago Sequoia Capital doused the ever ebullient Silicon Valley with a bucket of ice cold reality when it laid “good [...]
[...] The (in)famous RIP ppt from Sequoia Capital on startups & economic downturn Sequoia Capital, arguably the smartest venture capital investor in business, is sounding the alarm and asking its portfolio companies to buckle down for what could be the worst economic downturn of their relatively short lives. read the story at GigaOM. [...]
[...] The (in)famous RIP ppt from Sequoia Capital on startups & economic downturn Sequoia Capital, arguably the smartest venture capital investor in business, is sounding the alarm and asking its portfolio companies to buckle down for what could be the worst economic downturn of their relatively short lives. read the story at GigaOM. [...]
[...] Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble, Om Malik, GigaOM [...]
[...] Malik | Tuesday, December 30, 2008 | 5:00 PM PT | 0 comments Back in October, when I broke the news that uber venture fund Sequoia Capital had organized a secret meeting in which it warned its [...]
[...] It seems the news for the technology and web industry over the past few months has been nothing but gloom and doom, entrepreneurs needing to prepare for the worst, news of layoffs across the industry as org attempt to control costs, etc. Much of this is tied to the economy and the awareness of the tech space. It seems as if it hits continual new levels in media coverage since really the release of Sequoia’s now famous RIP Good Times presentation. The report was covered by many of the usuals if you missed it such as Venture Beat and GigaOm. [...]
[...] Fall, Sequoia Capital told their portfolio companies to prepare for the worst and make deep, preemptive cuts so they could avoid the “death [...]
[...] dudas, temores, miedo a la crisis, incertidumbre. En el pasado reciente hemos leido cosas como que Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble, Crisis? What crisis?, y mas, y [...]
[...] alarm bells are ringing in Silicon Valley and start-up land today with Sequoia Capital and Ron Conway telling companies to prepare for the economic meltdown and to raise cash by cutting [...]
[...] Gigaom.com is reporting a somewhat secretive meeting arranged by Sequoia Capital, one of the larger Venture firms in Silicon Valley. Apparently, the world’s greatest “innovators” are, bit by bit, getting used to the idea that, after all, Silicon Valley and its ridiculous me-too-get-rich-quick innovative mentality are not save in their bubble. [...]
[...] we’ve seen over the past couple of years tells me that the good VCs are willing to put high demands on their startups — nothing arcane, mind you, but the VCs are focused on funding companies with compelling [...]
[...] http://gigaom.com/2008/10/08/sequoia-rings-the-alarm-bell-silicon-valley-in-trouble/ [...]
Prepare for 3-6 months without additional financing? That’s no time at all. Obviously Conway is talking to companies that are incredibly tight with the VC community. They basically run their businesses on venture money.
[...] the sky was falling. Sequoia Ventures, one of Silicon Valley's oldest and most successful VC firms secretly assembled all of its portfolio CEOs and laid down the line in a PowerPoint presentation titled "RIP GoodTimes." Cut jobs and slash [...]
Manufacturing our own wealth again. We have seen what can be built, we want it, we know what we as a nation did before, and so we will start to do it again.
[...] has scratched and clawed to stay alive over the past year, taking Sequoia’s advice to downsize to some 50 employees from nearly 100, renegotiating royalty rates with record labels [...]
[...] VC’s were writing their CEO’s secret letters entitled ‘R.I.P Good Times ‘ [...]
[...] the administrative level. It seems like only last year that VCs concerned about a shrinking economy told their portfolio companies to cut, and cut deep. Oh yeah, it WAS last [...]
[...] continuing to fund startups in their portfolios that are adjusting their strategies now that the good times of 2007 and early 2008 are long gone, while taking fewer gambles on new ideas. Indeed, only 35 [...]
I am working in Sequoia.
Its really amazing John.
I am also working on it from last 3 years.