Bill Gurley of Benchmark Capital:
Existing cash flow is key, ’cause you ain’t getting any more from anywhere else any time soon:
Gurley also says for companies to expect “across-the-board reductions” in valuations, and a tough market for raising money – “Basically, the cost of capital is going way up.” Hedge funds are probably out of the picture for startup financings, he says, and corporate, strategic and angel money will decline.
But it won’t suck as bad as 2000-2003:
From a high level, this downturn is different from the Internet bubble of 1999. First,
the last downturn started in our backyard. We were the speculators; this time it is
someone else. This means that the “crash on the beach” wont be nearly as severe.
In the Internet crash, many times the customer was actually another VC‐backed
company and as such, there was a strong negative spiral. That said, while this
downturn might be shallower than last; it could last longer in terms of absolute
time. The American consumer is super‐leveraged which wasn’t true before the
1930’s or the 1970’s. The overall economy will have trouble gaining momentum
ith this debt anchor, and my best guess is the contraction is not finished yet. As
wsuch, it might take a long, long time before we see glory days again.
Which is good, because during that period I survived 14 rounds of layoffs at my previous company, and I’ve still got Startup Seasonal Affective Disorder, AKA End-of-Quarter PTSD, AKA “Anybody heard anything about our numbers? Anybody see stacks of moving boxes hidden in the mailroom?”
I can wait a while for glory days. I just want some reasonable stability. I really don’t want another fucking career holocaust amongst the rank-and-file techies. Seeing brilliant senior QA engineers working retail at the mall in 2002 was pretty fucking sobering.
But I don’t like the closing tone of tough love:
As an example, not hiring heads that were previous TBH isn’t really a
reduction in expenses. Also, 10% cuts rarely lead to anything other than multiple
rounds of cuts, which have a harrowing affect on culture. It’s easy to mentally
understand this is the right thing to do. It is ten times harder to make the actual
decisions to affect change. These are extremely hard decisions.
I have hurricanes. Doesn’t that earn me an exemption from high-tech slowdown carnage?