James Fallows is offering ongoing takes on how venture capital firms are reacting to the financial crisis — a writer always worth following. He’s previously posted a much-talked-about slide show by Sequoia Capital, essentially advising a batten down the hatches approach to running a startup. This generated a response from by one of his readers, Alan Patricof, the managing director of the New York VC firm Greycroft Partners, quoted in full at Fallows’ blog, and excerpted below:
This is surely a time for companies to pay meticulous attention to detail, particularly their cost structure. It is a time to be realistic in their near term assumptions for revenue growth and take nothing for granted.
Raising additional capital to support operations is of course critical, as it is at any time, but this is particularly a time for young companies to be extra cautious in developing pragmatic assumptions of their needs and in focusing on the amount and not necessarily the cost of that capital.
This is not a time to panic, cut off all investment in the future, and burrow into a dark hole. Take a page from the packaged goods industry that the time to gain market share is during tough times when your competitors are weaker in responding. And while this may feel more directly related to portfolio companies, we as a venture industry should not retreat either. It is our strong belief that we can and will continue to make sound investments in excellent opportunities. It is as good a time as ever to start a company with sound fundamentals.
An approach that makes sense. As a communications and marketing consultant, I’ve long enjoyed working with enthusiastic, optimistic entrepreneurs with loads of big-picture ideas who nonetheless took a measured approach. They invest in defining and positioning their brand, have clear objectives, and focus their communications on advancing strategies toward those objectives.
More, I think there’s something to this idea of money moving from exotic financial instruments toward ideas that make things — good ol’ fashioned ‘progress’.