Today vcfo hosted the first seminar in our new "Business Life Cycles Series" with an informative discussion about how early stage ventures can navigate this unpredictable economy.
The expert panel consisted of:
Corey Blahuta - Managing Director, vcfo
Derek Willis - Partner, Wilson Sonsini
Dana Duran - Director, vhr
Venture Capital funding is down for the third quarter of 2008, M&A is on hold, and there are few exit options at this time. Many are worried about what the future has in store. While there are always exceptions, for the most part entrepreneurs in early stage companies must be committed to running their company for the long haul. Nobody can predict right now when the window will again open. Many investors are taking a wait and see attitude for the foreseeable future.
To obtain funding in this environment you must have and idea / product that has been validated by customers. You need to be beyond concept and have actual customers if you are in search of funding options. You must execute to your business plan without fail and run a tight ship. "Lean and mean" are the buzz words to live by. While these points are always the case, in this climate there is no margin for error.
Investors have their own issues to deal with in this economy. VC's, banks, angels and others all are equally concerned with the unknown. Understanding their situation is important.
Bootstrapping is no longer an option for a company, but the reality. No matter how you are financed, all businesses need to incorporate a bootstrap mentality. Be frugal and be sure to understand the circumstance of the money that you do raise. This is not the time for "dumb money" or unsophisticated investors. You want your investors to bring value to your company beyond just the ability to write a check.
Get your team together and get the right advisers in place. Experienced lawyers, accountants, HR consultants, etc... all can help you chart your path to the next stage. Leverage your network to help you uncover all your options and utilize part-time and "as needed" resources for areas like marketing, HR, PR, IT, finance, etc... Companies like vcfo can make all the difference when you are encountering change and growth.
Attracting and retaining the right employees (and keeping them motivated) can be very trying in a downturn. Equity may not be as appealing when there is no exit in sight, yet the company may not be able to pay high salaries. Engaging some incentive compensation that ties bonuses to performance along with a good mix of equity and salary can help the company and the employees to keep working toward success. In the late 1990s it was all about equity, but those days are long gone. Linking pay to the achievement of goals is the best way to create a win-win scenario.
In times like this it is the vision of the entrepreneur that can make all the difference. If you have a great culture employees will be inspired to find ways to save money and cut costs during the lean times. Communication with employees is paramount as key team members want trust and transparency from management. When the employee feels they are part of the solution - tough times are less scary..
Adjust to the realities of the market, but do not stop pursuing your entrepreneurial dreams. Great companies are always born during the economic the downturns. Be aware of what is happening in and around your industry, but do not let the bad news paralyze your efforts.
Have A Great Day.