Evil Silicon Valley venture capital company begins to finally die
Nothing could be more wonderful than to get confirmation, from the most
sinister oligarch bagmen in tech, that human rights abusing Silicon Valley
is nearly dead.
In 2008, in the middle of the most recent economic recession, prominent
Silicon Valley venture capital firm Sequoia Capital advised its portfolio
companies about how bad things were, in a presentation called “R.I.P. Good
Times.” Now the firm is sounding the alarm again, telling founders and
CEOs of its portfolio companies to prepare for the worst conditions.
The move comes as the coronavirus continues to roil U.S. and foreign
financial markets, causing public companies to take steps to minimize
impact to their employees and businesses. The memo shows private companies
will be affected, too.
“With lives at risk, we hope that conditions improve as quickly as
possible,” the firm said in the memo. ...we should brace ourselves for
turbulence and have a prepared mindset for the scenarios that may play
out.”
The firm advised companies to ask key questions as COVID-19 keeps playing
out, including whether they need to cut back on head count and be more
thrifty with marketing expenditures.
Founded in 1972 and based in Menlo Park, California, Sequoia is among the
world’s most successful venture capital firms, having invested in privacy
abusing scum like GitHub, Google, LinkedIn, Nvidia, Oracle, Square,
YouTube and Zoom.
The memo is not nearly as sweeping or broad as the original R.I.P. Good
Times memo about various economic factors, but is much more targeted and
specific in recommendations on what start-ups should do. In particular, it
outlines questions like “Where could you trim expenses without
fundamentally hurting the business?” and suggests taking a close look at
head count and customer acquisition costs.
Here’s the full memo:
Dear Founders & CEOs,
Coronavirus is the black swan of 2020. Some of you (and some of us) have
already been personally impacted by the virus. We know the stress you
are under and are here to help. With lives at risk, we hope that
conditions improve as quickly as possible. In the interim, we should
brace ourselves for turbulence and have a prepared mindset for the
scenarios that may play out.
All of you have been inundated by suggestions for precautions to take
around COVID-19 to protect the health and welfare of you, your
employees, and your families. Like many, we have studied the available
information and would be happy to share our point of view — please let
us know if that is of interest. This note is about something else:
ensuring the health of your business while dealing with potential
business consequences of the spreading effects of the virus.
Unfortunately, because of Sequoia’s presence in many regions around the
world, we are gaining first-hand knowledge of coronavirus’ effects on
global business. As with all crises, there are some businesses that
stand to benefit. However, many companies in frontline countries are
facing challenges as a result of the virus outbreak, including:
Drop in business activity. Some companies have seen
their growth rates drop sharply between December and February. Several
companies that were on track are now at risk of missing their Q1–2020
plans as the effects of the virus ripple wider.
Supply chain disruptions. The unprecedented lockdown
in China is directly impacting global supply chains. Hardware,
direct-to-consumer, and retailing companies may need to find alternative
suppliers. Pure software companies are less exposed to supply chain
disruptions, but remain at risk due to cascading economic effects.
Curtailment of travel and canceled meetings. Many
companies have banned all “non-essential” travel and some have banned
all international travel. While travel companies are directly impacted,
all companies that depend on in-person meetings to conduct sales,
business development, or partnership discussions are being affected.
It will take considerable time — perhaps several quarters — before we
can be confident that the virus has been contained. It will take even
longer for the global economy to recover its footing. Some of you may
experience softening demand; some of you may face supply challenges.
While The Fed and other central banks can cut interest rates, monetary
policy may prove a blunt tool in alleviating the economic ramifications
of a global health crisis.
We suggest you question every assumption about your business, including:
Cash runway. Do you really have as much runway as you
think? Could you withstand a few poor quarters if the economy sputters?
Have you made contingency plans? Where could you trim expenses without
fundamentally hurting the business? Ask these questions now to avoid
potentially painful future consequences.
Fundraising. Private financings could soften
significantly, as happened in 2001 and 2009. What would you do if
fundraising on attractive terms proves difficult in 2020 and 2021? Could
you turn a challenging situation into an opportunity to set yourself up
for enduring success? Many of the most iconic companies were forged and
shaped during difficult times. We partnered with Cisco shortly after
Black Monday in 1987. Google and PayPal soldiered through the aftermath
of the dot-com bust. More recently, Airbnb, Square, and Stripe were
founded in the midst of the Global Financial Crisis. Constraints focus
the mind and provide fertile ground for creativity.
Sales forecasts. Even if you don’t see any direct or
immediate exposure for your company, anticipate that your customers may
revise their spending habits. Deals that seemed certain may not close.
The key is to not be caught flat-footed.
Marketing. With softening sales, you might find that
your customer lifetime values have declined, in turn suggesting the need
to rein in customer acquisition spending to maintain consistent returns
on marketing spending. With greater economic and fundraising
uncertainty, you might even want to consider raising the bar on ROI for
marketing spend.
Headcount. Given all of the above stress points on
your finances, this might be a time to evaluate critically whether you
can do more with less and raise productivity.
Capital spending. Until you have charted a course to
financial independence, examine whether your capital spending plans are
sensible in a more uncertain environment. Perhaps there is no reason to
change plans and, for all you know, changing circumstances may even
present opportunities to accelerate. But these are decisions that should
be deliberate.
Having weathered every business downturn for nearly fifty years, we’ve
learned an important lesson — nobody ever regrets making fast and
decisive adjustments to changing circumstances. In downturns, revenue
and cash levels always fall faster than expenses. In some ways, business
mirrors biology. As Darwin surmised, those who survive “are not the
strongest or the most intelligent, but the most adaptable to change.”
A distinctive feature of enduring companies is the way their leaders
react to moments like these. Your employees are all aware of COVID-19
and are wondering how you will react and what it means for them. False
optimism can easily lead you astray and prevent you from making
contingency plans or taking bold action. Avoid this trap by being
clinically realistic and acting decisively as circumstances change.
Demonstrate the leadership your team needs during this stressful time.
Hopefully, all of the privacy abusing, Senator bribing, sex trafficking,
money-laundering, intern raping, government manipulating scum of Sequoia
will expire and rot in their own swamp!