Sequoia Capital, a premier Silicon Valley venture firm, held a meeting on Tuesday during which it told its portfolio companies to cut costs and prepare for an economic downturn that could last many years.
The presentation, one attendee tells me, was like the global warming wake-up call movie “An Inconvenient Truth.” But instead of Al Gore running through a bunch of slides about the environment, it was billionaire investors running through a bunch of slides about a “very cataclysmic” economic future.
Here are presentation excerpts and comments drawn from a leak posted on GigaOm and left in comments on Silicon Alley Insider. Our sources have confirmed their accuracy.
Mike Moritz, General Partner, Sequoia Capital:
- “We’re talking survival. Get this point into your heads.”
- Companies need to be cash-flow positive, if nothing else in order to justify additional funding
Eric Upin, Partner, Sequoia Capital, formerly ran Stanford University’s $26 billion endowment fund:
- This could be at least a 15-year downward cycle, judging by historical trends; the credit market will take a long time to recover
- Startups need to deeply cut expenses, and throw out existing projections
Michael Beckwith, Partner, Sequoia Capital:
- A dramatic recovery is unlikely
- Spending cuts will accelerate through this quarter and into next year
- Only lean companies with proven sales models will be acquisition targets
Doug Leone, General Partner, Sequoia Capital
- Get aggressive with public relations communication strategies; cut marketing that doesn’t work
- Offer a product that reduces expenses and drives revenue
- Preserve capital over trying to gain market share
- Begin with zero-based budgeting to help prioritize necessary expenses
- Have at least one year’s worth of cash available
- Reduce expenses around products and boost sales; if product is ready, cut engineers (wow)
- Build essential product features first
- Reward salespeople based on commission, not base salaries
The final point: Get real or go home
Also, if anyone has a copy of the actual Sequoia presentation that they’d like to send over: eric (at) venturebeat (dot) com. Update: Here’s the presentation.