Archive for October, 2008

Scary Times

Friday, October 31st, 2008


It’s Halloween. Kids are having fun scaring each other and eating candy. And acting really weird.  This evening’s antics serve as an appropriate background for the past week. Two of the start-ups I am working with are suffering from a lack of funding. Not because their businesses are bad. No, they suffer from a lack of funding because they had the bad fortune of needing to raise a round now when most VCs are running like crazy headless chickens in the midst of the credit crunch. Thanks to Sequoia’s hysterical 100 CEO meeting a few weeks ago and the wacky deck they let out onto the blogosphere, many VCs act like they need to be afraid to be intelligent.

Have seen a few VCs actually step up in the midst of this and say “wow, now that the big boys are out, let’s step up our investment focus so that we pick up the best deal flow.” But those contrarians are rare. Has anyone noticed that Warren Buffett isn’t hiding? No, he is buying and since cash is king, he gets a great price. Lord if only I had a bigger bag of cash, I’d be shopping for companies, too. It’s amazing to me how little faith VCs have in the future. It’s ironic, given that they are supposedly in existence to provide capital where banks fear to tread. Well, here we go again. Time for a hunker-down period just like they had after the Internet bubble burst. As a result of that last chicken phase, many missed out on youtube, google, facebook, and other winners this go-around.

This gets me back to the CEOs I am working with. I am proud to be associated with these companies. They have built great products. They are not daunted by fearful VCs. They scrap for bits of investment from those with intestinal fortitude, they scrimp on costs, they build product, and with a little luck and the hard work they put into these ventures, they will come out on top. And leave the chicken VCs behind.

Trick or treat? That all depends on who’s handing out the candy. Today it’s the VC hemming and hawing at the door, but in the not too distant future, it’s the CEOs who stick it out through the hard times. And win.

Happy Halloween.