Over the last week, some of the smartest folks in the venture world have sounded the alarm about burn. It doesnt feel quite as bad as RIP Good Times, but I’m certainly anticipating some hangovers.
"No one's fearful, everyone's greedy, and it will eventually end." - Bill Gurley
A good amount of the conversation has focused on problems for later stage companies. How much do you allocate to acquiring marketshare? Do you begin to take your foot off the gas? Does this open the door for competitors to pass you by? These aren’t easy questions.
For seed stage companies, the question has less to do with large outlays on acquiring marketshare, but more about how much time you will have to dial in product-market fit and test out different acquisition strategies. Luckily, in 2008, Sequoia provided a great roadmap.
You might recognize one of the deck’s authors, Doug Leone. He would go on to back WhatsApp, perhaps the most capital efficient firm to exit in recent history. Even if you arent concerned about a coming bump in the road, it’s worth considering how you might use cash more wisely.
RIP Good Times Revisited
The RIP Good Times deck provides great context on the state of the world in 2008. It’s a good reminder about how quickly the macro environment can change. It’s also an essential reminder that very, very few companies respond fast enough when things do change.
If you want to jump ahead, start on slide 39 of 56. I specifically like the following slides.
For earlier stage, a bit of translation
- Engineering – can you wait on new hires?
- Product – how are you prioritizing new features? Can you live with approaches that don’t scale for now?
- Sales & Marketing – can you test more efficiently? Are any approaches yielding great returns?
- Finance – where can you defer payments? Can you reduce the time it takes to get paid?
We’re not so far over to the left on this continuum, so survival is not the right characterization. That said, it’s always valuable to understand what it might take to get to profitability. What happens if you aren’t ready for an A-round, but running low on cash? What happens if only a small number of your current investors are willing to bridge and you need to get traction with less?
It is very easy to set and forget budgets. There is always room to ask if you are doing everything you can to use cash efficiently.