Tough Times Ahead For Sequoia's VC-Companies

Published by on October 9, 2008

So it looks like the economic downturn is started to reach into the venture-capital world as well. Sequoia just sounded the alarm bell, signaling that bad times are ahead for their portfolio companies.

They cautioned their portfolio companies that this may be the worst economic downturn that you or your company has ever experienced, so be prepared.

Words of Advice to Startups

Sequoia gave their companies some guidelines to help them through this time, because things are going to get rough:

Raising capital will be much more difficult now. You should lower your “burn rate” to raise at least 3-6 months or more of funding via cost reductions, even if it means staff reductions and reduced marketing and G&A expenses. This is the equivalent to “raising an internal round” through cost reductions to buy you more time until you need to raise money again; hopefully when fund raising is more feasible.

What Are You Doing?

Is your startup hitting a rut? Do you have enough cash on hand to make it through the downturn? How’s your burn-rate looking? Good luck, because we’re used to buckling down and it’s only going to be stepped up going forward.