Managing a Crisis the Sequoia Way

Control what you can control. Be steady but decisive. And most importantly, build a sustainable business where you are in control of your destiny.

Roelof Botha, Sequoia Capital

Lately, I’ve been seeing something I’ve never seen before in the eyes of some of the founders I meet: desperation.

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Fundraising is increasingly difficult, tech has gotten crushed and the economy is almost surely in recession. Companies that were doing great just a few months ago are staring death in the face.

With that in mind, I spent this afternoon digging into Sequoia Capital’s recent presentation on what the downturn means for startups.

It offers the best advice available for startups navigating this difficult market. Sequoia’s partners advise startups to be prepared to cut back to ensure survival, if necessary.

If your runway (time until you run out of money) is getting short, you may have to make painful cuts in spending.

Do the cut exercise (projects, R&D, marketing, other expenses). It doesn’t mean you have to pull the trigger, but that you are ready to do it in the next 30 days if needed.

Doug Leone, Sequoia Capital

Sequoia also emphasizes that this crisis offers many opportunities. Many companies are more focused once they cut back and hunker down for a bear market.

What’s more, recruiting, which has been extremely difficult for many startups, is about to get much easier. As Leone notes, all of the FANG companies have hiring freezes.

This means startups can have their pick of the best possible people.

Even better yet, some of your competitors are about to go out of business! But if you carefully manage cash, you’ll survive and have a chance to dominate your market.

Look at this as a time of incredible opportunity. You play your cards right and you will come out as a strong entity.

Roelof Botha

This downturn doesn’t mean that you have to stop growing. But it may mean paring back side projects to focus like a laser on driving efficient growth in your core business.

You can still sign up customers in a downturn if you have a strong value proposition. Since I mostly invest in SaaS, I found this passage on proving value to business customers especially helpful:

Three reasons why people buy regardless of market conditions (enterprise POV):

● Drive growth

● Save money (real, hard ROI)

● Reduce risk

● Everything else is fluffy “

Carl Eschenbach, Partner, Sequoia Capital

Finally, it’s important to remain hopeful even if things get hard!

“Whatever we are facing today, it can’t be any worse than the uncertainty we faced at the beginning of the pandemic. We will prevail.”

Alfred Lin, Partner, Sequoia Capital

You created your company for a reason. You have a mission to fulfill.

A downturn doesn’t change that. You just have to manage it correctly and seize the opportunity it presents.

The very best of luck to all you brave founders!

What challenges are you seeing in startupland today? Leave a comment at the bottom and let me know!

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Photo: “Sequoia Capital” by isriya is licensed under CC BY-NC 2.0.


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