Updated with the Sequoia powerpoint: Last night I reported

There were some gaps in the details about that meeting, but I have since been able to piece together the minutes and what folks there essentially said. Since these are second-sourced details, I cannot say they are a 100 percent accurate, so please view them with a degree of skepticism. Nevertheless, I still feel confident enough to share them.

These were the four speakers:

Mike Moritz, General Partner, Sequoia Capital, who moderated the speakers. The speakers were Eric Upin, Partner, Sequoia Capital, who until recently ran the $26-billion Stanford Endowment Fund, and Michael Partner, Sequoia Capital, who was Sequoia’s very first hedge fund manager and worked at Maverick Capital and Robertson Stephens. The last speaker was, as I mentioned before, Doug Leone, General Partner, Sequoia Capital.

Moritz Musings

Mike Mortiz kicked off the proceedings by saying that these are drastic times and that means drastic measures must be taken to survive. His message to companies was don’t worry about getting ahead, instead, “We’re talking survive. Get this point into your heads.” He warned that companies need to be cash-flow positive, and if they are not, then they need to get there now, because raising capital without being cash-flow positive is going to be tough. He was warning that there will be a price to pay for those who hesitate to act.

Upin Says

Upin, who knows a thing or two about money and markets, told the room that we are in the beginning of a long cycle, what he called a “secular bear market.” This could be a 15-year problem, he said. This comment was accompanied by many slides that showed historical charts of previous recessions averaging 17-year cycles. He pointed out that the issue here is not the equity markets but the credit market, and that will take a long time to recover. He was ominous in warning the startups that this is a global issue, it is not a normal time, and is a significant risk not just to growth but to personal wealth.

He advised startups to make drastic changes, to cut expenses and to cut deep, but to still keep marching. “You can’t be a general if you turn back,” he apparently said. The point he hammered on was that since you can’t manage the economy, manage everything else, including your business. He had some interesting advice for startups.

• Cut spending. Cut fat. Preserve capital.
• Throw out the models and spreadsheets, because all assumptions will be wrong.
• Focus on quality.
• Reduce risk.

Michael Beckwith

Michael Beckwith’s presentation had lots of charts and data and he pointed out that the V-shaped recovery is unlikely. He also said that the cuts in spending will accelerate in the fourth quarter and the first quarter of 2009, and pointed to eBay as an example.

Leone’s lessons

Doug Leone told the group that this downturn was a different animal and one from which it would take “years to recover.” He was clear in pointing out that:

• Unprofitable companies would have a tough time raising cash, so get cash-flow positive as soon as possible.
• Go on the offensive and pound on your competitors’ shortcomings.
• Be aggressive with your messaging and be out there. In a downturn, aggressive PR and communications strategy is key.
• Decline in M&A will mean that only lean companies with sales models that work will get bought.
• When it comes to deciding between capital preservation and grabbing market share, he advised that everyone should be preserving capital.

Leone’s other tips for companies, especially the Sequoia portfolio companies, were something like this:

• Start with zero-based budgeting.
• 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.
• Cut base salaries on sales people and leverage them with upside.
• Most importantly, be true to yourself.

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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.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• GigaOM Research highs and lows from CES 2013
• How HR can make the case for workforce analytics
• The 2013 task management tools market