Call it a readjustment. Call it a chill. Call it noise that you should probably just ignore. But whatever name you want to give to the reality, the climate for start-ups is shifting. Funding, say a whole host of experts, is about to get a lot harder to come by.
So what do you do if you were counting on getting some of that funding? Skip the blind panic and instead read a recent post by Heidi Roizen, an operating partner at VC firm DFJ and veteran of the first tech bubble. I can't say it'll be cheerful for you -- "So which is it going to be for you? Tougher? Or dead," she asks founders -- but it will provide some solid advice for dealing with the new realities facing fledgling businesses, including these tips (far more in the complete post):
1. Stop clinging to your valuation
It's time to rid yourself of "valuation nostalgia," Roizen tells founders. "Yes, it was great when companies could raise those amounts, at those prices, blah, blah, blah, but the cheap-money-for-no-dilution thing is largely over now. The sooner you get on with dealing with that, and not clinging to the past, the better off you will be," she writes.
2. Redefine success
"Holding on to 'old' ideas about IPO dates, large exits and massive new up rounds can ultimately be demotivating to your team. If you can make it through the downturn, you will have those opportunities again. But for now, reset your goals," she instructs.
3. Get to cash flow positive with what you have in the bank
This is otherwise known as surviving, Roizen notes. "You know what kind of companies generally survive? Companies that make more money than they spend," she adds. Moonshot companies who can't realistically accomplish this can stop reading now, but for the vast majority of start-ups, Roizen would like to assign some homework:
"I want you to sharpen your spreadsheet, right now, and see if, by any hugely painful series of actions, you could actually be a company that makes money. ASAP. Or at least before you run out of money."
4. Morale schmorale
This bit of wisdom might come as a shocker to some, but Roizen insists that you can't worry about morale in a crisis. "You know what hurts morale even more than cost- cutting and layoffs? Going out of business," she sensibly points out.
5. Consider who your customers are
Are they venture-funded tech companies? Are they realistically going to keep paying you in the near future? Are they even going to be around? "If you are in Silicon Valley and your customers are mostly well-paid consumers with no free time, or other venture-backed startups, well, I'd be worried. And yes, it sucks, but it is better to be worried than surprised," she says, leveling with founders.