Seqouia warns its CEOs

Silicon Valley venture capital giant Sequoia has summoned its CEOs to say… beware! Here’s an e-mail someone forwarded me this AM

> Sequoia just held a MANDATORY meeting for all CEOs. Second time in their
> history. Last time it was when the Internet bubble popped. Thought you
> might find the following interesting–notes from one of the CEOs in
> attendance
>
> * *
>
> * *
>
> ****These are someone’s notes from the meeting. Keep this note in your
> in-box and read it every day. I’m serious folks, this is for our
> survival.****
>
>
>
> Speakers:
>
> · Mike Moritz, General Partner, Sequoia Capital /(he moderated the
> speakers)./
>
> · Eric Upin, Partner, Sequoia Capital /(Eric ran the $26-Billion
> Stanford Endowment Fund and knows a few things about Economics and
> investing.)
>
> · Michael Partner, Sequoia Capital /(Michael was recruited to
> start Sequoia’s very first hedge fund, coming from Maverick Capital and
> Robertson Stephens.
>
> · Doug Leone, , General Partner, Sequoia Capital
>
> Slide projected on the huge conference room screen as people assembled
> inside the conference center to take their seats: *a gravestone with the
> inscription: RIP, Good Times.*
>
>
> *_Mike Moritz:_*
>
> * *
>
> · 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.
>
> · For those of you that are not cash-flow positive, get there now.
> Raising capital is nearly impossible if you’re too far off of cash flow
> positive.
>
> · There will be consequences for those who hesitate. Act now.
>
>
>
> *_Eric Upin:_*
>
>
>
> · It’s always darkest before it’s pitch black.
>
> · Survival of this storm means drastic measures must be taken now,
> so you will have the opportunity to capitalize on this down turn in the
> future.
>
> · We are in the beginning of a long cycle, what we call a “Secular
> Bear Market.” This could be a 15 year problem. [many slides on
> historical charts of previous recessions, averaging 17 year cycles.]
>
> · The credit market [versus the Equity markets] are the issue and
> will take time to recover.
>
> · Inflection point: Make changes, slash expenses, cut deep and
> keep marching. You can’t be a general if you turn back.
>
> · This is a global issue and not a ‘normal’ time.
>
> · There is significant risk to growth and your personal wealth.
>
> · *Advice:*
>
> o Manage what you can control. You can’t control the economy, but you
> can control everything else.
>
> § Cut spending. Cut fat. Preserve Capital.
>
> § Don’t trust your models and spreadsheets. All assumptions prior to
> today are wrong.
>
> § Focus on quality.
>
> § Reduce risk.
>
>
>
> *_Michael Beckwith:_*
>
>
> · Note: Michael had a lot of slides that were charts, data points
> and comparisons.
>
> · A “V” shaped recovery is unlikely [?]
>
> · Cuts in spending will accelerate in Q4/Q1. Look at eBay—this is
> just the beginning.
>
>
>
> *_Doug Leone:_*
>
>
> · This is a different animal and will take years to recover.
>
> · Getting another round if you’re not profitable will be rough.
>
> · Do everything possible to get to cash flow positive. Now.
>
> · Nail your Sales and Marketing message.
>
> · Pound your competitors shortcomings. They’re hurting and they
> will be quiet. Take the offensive.
>
> · In a downturn, aggressive PR and Communications strategy is
> key.
>
> · M&A will decrease dramatically and only lean companies, with
> proven sales models will be acquired.
>
> · *Spectrum discussion:*
>
> o Capital Preservation ß———————————-à Grab Market
>
> o Everyone should be far to the left (capital preservation)
>
>
>
> · *Requirements of our companies:*
>
> o You must have a proven product
>
> o You must cut expenses. Now and deep.
>
> o Your product should reduce expenses and drive revenue
>
> o Honestly assess your solution vs. your competitors.
>
> o Cash is king
>
> o You must get to profitability as soon as possible to weather this
> storm and be self-sustaining.
>
> / /
>
> · *Operations review:*
>
> o *Engineering:* Since you already have a product, strongly consider
> reducing the number of engineers that you have.
>
> o *Product:* What features are absolutely essential? Choose carefully
> and focus.
>
> o *Marketing:* Measure everything and cut what is not working. You don’t
> need large Product Marketing, Product Management teams.
>
> o *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.
>
> o *Pipeline:*/ /Scrub the shit out of it and be honest with yourself.
>
> o *Finance:*/ /Defer payments, what is essential? Kill cash burn.
>
>
>
> · *Death Spiral */(Nobody moves fast enough in times like these,
> so get going and research later.)/
>
> o The death spiral sucks you in, you’re in it before you know it and
> then you die.
>
> o Survival of the quickest.
>
> o Cutting deeper is the formula for survival.
>
> o You should have at least one year’s worth of cash on hand.
>
> o *Tactics:*
>
> § Assess your situation. Drop your assumptions, start with a blank page
> and start zero-based budgeting.
>
> § Adapt quickly
>
> § Make your cuts
>
> § Review all salaries
>
> § Change sales comp
>
> § Bolster your balance sheet—if you can add $5M to your coffers, take it
> and save it.
>
> § Spend like it’s your last dollar.
>
> · *Get Real or Go Home.*
>

Here’s the powerpoint: