Darwin’s principles of evolution and survival have never pervaded the business world as drastically as they have recently. No further proof of this is necessary than a cross-section of the discussion that occurred at Sequoia’s meeting of CEOs Tuesday to access and expound the meaning of survival. Based on the Gigaom exclusive "Sequoia Rings the Alarm Bell…" we here at Flypaper.tv have gathered new information regarding the details of what was said and by whom at Sequoia’s meeting. Sequoia Capital , debatably one the most respectable and intelligent venture capital investors in business, hosted a mandatory CEO "All-Hands Meeting" on Sand Hill Road in Silicon Valley. There were about 100 CEO’s in attendance and, according to sources, the mood was somber.
Mike Moritz , General Partner, moderated the speakers and set the tone; in no plainer terms, “there will be consequences for those who hesitate. Act now.” He continued to establish that the only other time that CEOs assembled in such a fashion was during the dot.com crash. With the gravity of the economic situation in mind he suggested that “we are in drastic times. Drastic times mean drastic measures must be taken to survive. Forget about getting ahead, we’re talking survive. Get this point into your heads.” Doom and gloom permeated the discussion. Doug Leone , another General Partner, commented that this is no ordinary economic crisis, “this is a different animal and will take years to recover.”
How many years?
Eric Upin , Partner – who ran the $26-Billion Stanford Endowment Fund and knows a few things about Economics and investing – firmly conveyed "we are in the beginning of a long cycle, what we call a ‘Secular Bear Market.’ This could be a 15 year problem.” According to his slides regarding previous recessions, the cycle is averaging 17 years.
Another speaker, Michael Beckwith who focuses on global public market investments, stated that a V-shaped recovery is not likely; in fact he insisted that entirely new tactics and aggressive survival strategies must be employed, and they must be employed NOW.
Leone echoed this sentiment and enforced that “aggressive PR and Communications strategy is key.”
So, the situation is grim . Having hammered home that survival is what is being faced, the meeting accessed the situation in terms of forward-movement, advice, and what is to be done. Decisive and swift movement is necessary; frugal, day-to-day management of expenses and business was described as imperative to survival. Suggestions from Leone included “nail[ing] your Sales and Marketing message…Pound your competitors’ shortcomings. They’re hurting and they will be quiet. Take the offensive…M&A will decrease dramatically and only lean companies, with proven sales models will be acquired.” Further instruction:
1. You must cut expenses. Now and deep.
2. Your product should reduce expenses and drive revenue
3. Honestly assess your solution vs. your competitors.
4. Cash is king
5. You must get to profitability as soon as possible to weather this storm and be self-sustaining
6. Engineering: Since you already have a product, strongly consider reducing the number of engineers that you have.
7. Product: What features are absolutely essential? Choose carefully and focus.
8. Marketing: Measure everything and cut what is not working. You don¹t need large Product Marketing, Product Management teams.
9. Sales & Business Development: What is your return on this investment? The Valley has gotten fat with Sales people: Big bases, big variables. Cut base salaries on sales people, highly leverage them with upside (increase variable) and make people pay for themselves via increased sales productivity. Don’t add sales people until you’ve achieved your goals with sales productivity. Be disciplined.
10. Pipeline: Scrub the shit out of it and be honest with yourself.
11. Finance: Defer payments, what is essential? Kill cash burn.
The “death spiral ” was also discussed. “The death spiral sucks you in, you’re in it before you know it and then you die.” The options for survival were outlined clearly as survival of the quickest and cutting deeper in order to "make-it." Those present at the meeting were told they “should have at least one year’s worth of cash on hand.” Obviously, Jobs will be lost, savings will be gone. The situation is indeed scary. With the DOW plummeting every single day (yesterday’s 7.3% decline brought the DOW down to 8579) with no end in sight, it is fair to conclude that we certainly are existing in a brave new world. In a very Darwinian sense, the survivors will be those that are able to adapt quickly.
Here is a fascinating powerpoint on what went on:
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January 26th, 2009 at 6:45 pm
[...] Inside Scoop: Sequoia’s Meeting of CEOs [...]