An article in yesterday’s Wall Street Journal recounted stories of clashes taking place amongst board members at various technology start-ups as to whether they should be conserving their limited cash or spending in the hopes of grabbing attention and market share from their competitors. Besides the statistic that VC investment in Silicon Valley start-ups was down 57% from last year, a couple of things struck me about the article.
The first was a comment by Ken Comee, the CEO of Cast Iron Systems, a 100-person software company, who I thought had a great line when he said, “Companies can’t save their way to success,” and then went out and fashioned a number of partnerships with prominent firms including Google, Microsoft, and Oracle. What struck me was how little I hear about focusing on creating partnerships during a downturn. The downturn provides an excellent opportunity to build relationships with complementary firms. Everyone is more open to taking steps to build their business – even the big guys.
The other thing of note in this article was about the battle to conserve or spend at Jaspersoft Corp., an 80-person software start-up with $15 in cash reserves. The Chief Executive, Brian Gentile, ultimately convinced a divided board to spend by making a presentation that provided data showing a healthy sales pipeline. What struck me was that he also presented a contingency plan on how the firm could scale back spending if sales projections weren’t realized. I wonder how many firms would be open to more aggressive spending during the downturn had they fashioned detailed contingency plans on which they could rely if their efforts failed to meet expectations?
You can read the entire article here.
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