Venture capitalists: We're still open for business

[ Music ] ^M00:00:05 >>Hi. This is Rafe Needleman from CNETnews.com [inaudible] at the Venture Beat Panel in Palo Alto on how to survive the downturn for tech companies and entrepreneurs. We're about to hear from a panel of venture capitalists on their advice for start-ups. Then we'll talk to some start-up entrepreneurs about what they are doing in response to that advice and how they plan to make it through the next couple of years. >>I sent an email out to survey about a dozen and a half of finer [inaudible] CEOs and CFOs to get their specific ideas of what would be helpful. I have assembled those into a list of ten ideas in the list that I'm pretty darn sure you're going to agree with and then they can add more to it. So we [inaudible] a little time on that. So, here's a list of ten. The first is to act now. So to at with speed. And that act may be raising more money. Get a convertible loan. Focus in cutting, selling, whatever [inaudible] now. Point one. >>Point two. Protect the vital core of the business. So that means use a scalpel instead of an axe to be surgical about what we're going to do to get more runway or more time. >>Point number three. In every case -- you've heard this before. It's worth repeating. Get 18 months or more of cash in the business against a conservative, set a revenue forecast. >>Point number four. Defer any facilities expansions and really be frugal with respect to capital expenditures. Just put that stuff off. Instead of buying more PCs or software for PCs, use our technologies, our web-based stuff. I wrote a note to Andy Becklesheim [assumed spelling] and his first recommendation back to was use google docs. You can run it all over [inaudible] without any PCs, without any PC software, using web-based services. He said it's remarkable how good it is and how well it works. >>Fourth. Reprioritize and re-rationalize all the [inaudible] that is going on in the company. Can't afford to do that all. >>And the fifth is negotiate. In this kind of a climate, everything is negotiable. All those suppliers, all those vendors, you can more [inaudible] with the paying terms, you can renegotiate prices and adjust contracts. You got to renegotiate. Everything is negotiable and then to my sixth point. >>Everybody in the organization should be selling. And you guys know I come out of a sales career, but I think selling is a really honorable profession. So everybody from the receptionist who is supporting the whole organization, to the engineers is selling. We're selling the organization. We're selling the ideas and trying to get revenue because this is not just about expenses. It's about increasing revenue. >>Seventh point is -- I think one of the things you can do for people with bonuses is you can offer them equity instead of cash. A while ago when I was a co-founder of a company and running it, we had a voluntary salary reduction program for the people who remaining there during one of the downturns. And those who could, some couldn't, swapped their cash, or a portion of that, into more ownership in the company. You'll find your investors at the board are going to be on board with that idea. >>Number eight. Pay attention to where your cash is. Brom [assumed spelling], I and others are advising companies to put all of their cash in the most secure possible instruments. I know they say that money market funds are now guaranteed. I don't believe it. I'm telling our companies to move into treasuries. Move into something that is backed by the full faith credit of the United States government. >>Make sure -- he's point number nine -- for the revenues you plan, if you have what Andy Brom [assumed spelling] leading indicators, but you've got something that's going to tell you 90 days in advance in all likelihood you're going to get that revenue or not because whatever [inaudible] plan we do now, we are going to have to readjust as this uncertain future unfolds. >>And then the tenth and final thing I think you must do is overcommunicate. Overcommunicate with your employees. Overcommunicate with your investors. Overcommunicate with your key customers. Let them know about your resolve, your commitment. Don't sugarcoat this situation that we're in. >>Ten points. And I would love to hear 11, 12, 13 and 14. >>Ron invested in tons of early stage companies -- your advice in the current economy for entrepreneurs? >>Business as usual unless you have less than a year of cash. If you have less than a year of cash you do need to be proactive and cut costs and hopefully raise money from your existing investors. But the rest of the companies are probably doing fine and focus on building your business. >>You want to act quickly if you have less than a certain amount of money -- you want to think about either shutting down, or selling it, or just sort of being real about what your prospects are. If you've got a decent amount of capital make it last longer, move people to freelance, cut costs. Downsize. Get rid of your office. Co-habitat with somebody. [inaudible] as long as possible because the problem today is people don't know how bad this is. >>You have to make your cash work harder for you. And to that end, you have to get surgical about what you want to spend on and what you don't want to spend on. You need to be [inaudible] very honest with yourself and take a very good, hard look at what your priorities are as a business and you may actually be able to take advantage of some opportunities as you're not the only one that's going through this. And so, if you have cash, I think cash could be king and you can get a lot of products and services, you know, for pennies on the dollar. >>If you think about how to run a company in an uptime versus a downtime, there really shouldn't be that much difference. I mean, running a lean company, especially if you're at a start-up early stage that's very little revenue, that should be a mindset that permeates the organization, whether it's an uptime for a downtime. I think, you know, that it takes that 10 point advice that John Door [assumed spelling] had, and sort of go through that and make sure we're doing everything aligned with that. We've been, you know, making sure we're not spending a lot of money. We're not growing too quickly. So, I'm trying to follow that sort of stuff anyway. I'm just going to go back and review some of the things we're doing and make sure we are aligned with that sort of stuff. >>So you heard it here first from the venture capitalists themselves. They are open for business. It is a bleak time in the economy, but it is not a bad time to start a business. This is Rafe Needleman from cnetsnews.com [inaudible] [Background music]