Joe Mandato’s Post

We are in the midst of one of the most significant #venturecapital slumps since the ’09 financial crisis. I recently posted about the importance of VCs fulfilling their roles and meeting their responsibilities by continuing to invest in promising companies (both new and, importantly, follow-on rounds.) In the last major financial crisis, Sequoia Capital advised entrepreneurs to batten down the hatches, and I agreed with that. The general idea here is that it takes two to tango. Entrepreneurs and VCs each need to do the dance. As I recall, Sequoia’s mandate to its portfolio companies was slow spending, stop hiring, rethink and rewrite operating plans, restructure funding expectations and timelines, reduce headcount, cut salaries, rethink stock options grants, table non-vital projects, and more.   We know every innovator thinks their technology is the best and warrants outsized investment levels. In reality, the winners will be those who recognize they need to cut back, and how much they need to cut back, who do less with less and figure out how to bootstrap their way to revenues wherever possible, and more.    As a CEO, I never quite had to #restructure a company to that extent, but I came close, and I know restructuring is not typically in the entrepreneur’s toolkit, nor is it easy. I was leading a company whose product was taken off the market suddenly and unexpectedly, practically in one day. The next day, I walked in and told my bosses at Eli Lilly and Company, which had just acquired us, that I was going to cut forty percent of our overhead. I fully planned to do it, but Lilly told me not to cut a soul. While amazing, it was an atypical response.   I do know firsthand, as a #boardmember, the difficulties of restructuring everything. As difficult as it was, it can be done, it must be done, and the companies that emerge are better off for it.   It takes two to tango. VCs need to pony up more capital more often and with more creativity to fulfill their roles; they need to infuse less panic, and more wisdom and support. Simultaneously, #innovators need to do their part and look long and hard at how they spend investors’ money.   Jay Watkins Kate Garrett Fred Moll #leadership #entrepreneurship