I have been getting lots of requests for, and inquires about, the Survival Guide that I wrote, so I thought that I would post a little background about its origin.
On September 23rd, 2008, I sent the following email to the DFJ Network:
------ Forwarded Message
From: Simon Olson
Date: Tue, 23 Sep 2008 18:57:31 -0200
To: DFJ Network
Conversation: DFJ Guide to Navigating a Challenging Environment?
Subject: DFJ Guide to Navigating a Challenging Environment?
Dear All,
In light of the recent instability in global financial markets, how about putting together a short guide for portfolio company CEOs on "Navigating a Challenging Environment" (or words to that effect)?
As you may know, some of our portfolio company CEOs were not active during the last downturn, hence they may not know all of the tricks to managing difficult times.
Rather than leaving them to their own devices or attempting to help them seriatim, compiling a collection of tips from around the Network and turning them into a short guide might be a scalable way of dealing with the situation.
Unless someone else wants to do it, I am willing to compile the tips, edit them into a document, and share the completed guide with all participating firms.
So, if anyone has any tips, please email them to me (I have included a few samples below).
As always, this is intended to be a group effort with value accruing to the Network, rather than any one individual or firm.
Thanks!
Kind regards,
Simon
--------------------
Sample observations:
- in a difficult environment, focus on clients that will spend money no matter what, ex. When the Dot Com bubble burst, IDEO shifted from doing projects for large corporations to assignments for NASA.
- in an economic downturn, large public companies will normally only acquire companies that are profitable or breaking even. As much as they may want market share, they don't want to dilute their numbers with someone else's losses. So, if you plan to sell your company, do whatever you can to get to break-even.
- don't forget the second half of the demand question, i.e. The question is not just, "Does a customer need my product/service?", but also, "Do they have the money to pay for it?"
------ End of Forwarded Message
In response to my inquiry, I received about nine emails from DFJ Network members, five of which said essentially the same thing: lower the company's burn rate.
While the tips were excellent, they were not enough to produce a comprehensive document, so I started investigating the various ways of helping start-ups survive an economic crisis.
In the meantime, Sequoia, Bill Gurley, and Ron Conway came out with their respective contributions, removing any sense of urgency.
Since their works did such an excellent job of explaining the crisis and outlining defensive measures for start-ups, I tried to take the survival guide in a slightly different direction.
Specifically, I tried to dig a little further beneath the surface--reiterating many of the defensive strategies that they suggested, while explaining how to actually put them into practice.
So, for example, instead of saying, "lower your burn rate by reducing your head count", the Survival Guide goes one step further, explaining how to figure out who to let go, and how to conduct the process.
I hope that the Survival Guide succeeds in helping entrepreneurs and CEOs execute.
If nothing else, at least people will learn how to survive a rip tide!
Links:
http://drop.io/survivalguide
http://www.slideshare.net/simonolson/survival-guide-presentation
