Print
Email
Print Edition StoriesFriday, February 20, 2009
How I See It
Brotherly advice for entrepreneurs in times of trouble
MHT's Marc Songini: Mass. bio firms prep for lifting of stem cell ban
MHT's Efrain Viscarolasaga: Solar installation booms in New England
How is the economic crisis affecting tech companies?
After 20 years of doing this — co-founding 14 companies, teaching entrepreneurship at MIT and at Tufts, reading hundreds of business plans and investing millions of dollars — I still regard myself as a student of entrepreneurship.
Many times in facing various speed bumps in startups, pattern recognition kicks in and a set of standard solutions magically appears. However, in this recession, there are new rules being written that just may open new opportunities that will better prepare us for what will be a long climb back.
This is not another trite opinion piece about “cash is king,” “focus” and “sticking to the knitting.” There have already been enough seminars and columns on how to deal with this crisis. Even first-time entrepreneurs are smart, or scared, enough to cut their expenses to the bone, amputate a leg if necessary and harbor cash at all costs.
On the contrary, this is a series of bullets, resulting from questions I’ve pondered over these past four months of collapsing financials, that I’ve crystallized into brotherly advice.
• Be fearful
Prepare for more bad news, deeper layoffs among your customers and tighter constrictions in cash and credit for at least the next 12 months. Even in light of trillions of dollars being injected into a very sick patient, the best we can expect is that the coma continues and that the sickness doesn’t worsen, but I’m not that optimistic for this year. The patient will ultimately live because it has to, but it will be a very long recovery.
• Read everything
Take 60-to-90 minutes a day and immerse yourself in hard data and news about your industry and your customers. Follow the analysts, get on their conference calls and read the gurus’ blogs to see detailed trends in your market so that you’re better prepared for renewed investing, either now or at the bottom. Also, for perspective, read Studs Terkel’s “Hard Times About the Great Depression,” and give the chapter on “Big Money” a careful reread.
• Think opportunity
Borrowing President Obama’s rallying cry, “the time is now,” this is a unique time in history that we’ll look back on and ask, “Did I make the right decision about investing in my business?” The time is now for the detailed planning on when and where to invest. Right now, there’s extraordinary talent on the street. What type of a deal could you put together to recruit that player to either join you right now or work part time for little cash but a larger bite at the equity apple? In this market, you’ll find that the more experienced the player, the more risk they’ll take in emerging companies with solid business models.
Corporations and investors are shedding their assets for little to no cash just to clean up their balance sheets and refocus. Obviously, you don’t want the dogs, but there could be gold among what corporate controllers and bank regulators perceive as stagnant businesses, product lines or technologies. Target the opportunity, do the research, assess your limits and then pick up the phone and call their biz-dev people or their investors. You’ll find that the hit rate is relatively high to get into meaningful discussions.
Those with the clarity of vision, the financial acumen to structure deals and chutzpah in negotiation are going to look back at this ugly mess and remember that this was when new businesses were born, perfect-storm deals were consummated, a wave of entrepreneurship erupted and fortunes were created.
What would I tell my brother? This is the perfect time to rethink, restructure and reinvest. All it takes is the will and the strength of our personal convictions to change.
Jack Derby is the founder of Derby Management, a Boston-based management coaching organization for the venture community, and is chairman of the Association for Corporate Growth.
RSS Feeds
Comments (2)
Please Login/Register to post comments.