Tuesday, December 23, 2008
As we have declined into this ugly recession there has been a lot of fear mongering in the VC/startup world of Silicon Valley. Articles about the impact of the recession on venture capital and on startups – typically with a gloomy outlook that the glory days are gone and everything is going to be bad for a long time.
The most irresponsible was the now infamous Sequoia doom and gloom presentation to its companies advising everyone to cut deep and fast to “just survive”. But to me this is a terrible mindset and a mindset driven by fear.
I believe Fear is the mind killer [to quote Dune]; you cannot build a company from fear and my job is to build a company or if I fail, not fail due to lack of trying. The implicit contract between great venture investors and their CEOs is to do whatever it takes to build something of high value – company or technology – and create a great rate of return as a result. It is certainly not to survive and create lifetime employment without creating value – and cutting too deep in a young company can destroy the very value you are in business to create. It’s a challenge to cut as deep as possible to create as much runway as possible (which we have done at FirstRain) but not damage the asset which is your very reason to be in business and not damage your support of your customers who are your future.
I also believe that great change is a time of tremendous opportunity because it illuminates underlying power structure that is actually harder to see in a strong market when everything is working – and fear will blind you to seeing the opportunities.
You have probably observed how power shows itself when a company is going through a reorganization – you can see who consolidates their personal power and scope of responsibility as the reorg goes down. In markets you see this in a downturn – the truly profitable pieces of the market show themselves. I can see this today in our December orders – who is buying and renewing and who isn’t. Also as markets shake out you can see new ways to make money that were not visible before. Today we are teaming up with a new partner to take share from their weaker competitor and we have new distribution opening up for completely new applications of our technology. Both of these new relationships emerged as the market cratered in October.
Fear is an indulgence that a CEO cannot allow him/herself – not only is it a waste of time and energy but it can cripple your actions and hurt your company by preventing you from taking the very risks that you need to take. There is some sound advice on this subject in Sunday’s TechCrunch article Fear Kills Businesses, Dead.
The best way I have found to manage fear is to be very conscious of my own mind and just not allow it. This can make me seem unsympathetic – so my apologies if I offend.