The credit crunch, startups and optimism

Jason Calcanis recently wrote about (The) Startup Depression. As you may know Jason is (still) retired from blogging in order to concentrate on a smaller, closed community via email. He initially wrote the essay as an email to his mailing list, but later opened it up on his otherwise now-dormant blog.

“I promised myself I was retired from blogging to focus on my email newsletter, but I’m getting pounded with so many requests for this essay that I’m giving up and posting it here. This does not mean my retirement from blogging is off, this means I’m posting this so I don’t have to respond to hundreds of emails asking for a copy.”

Clearly, this highlights an important (and obvious) difference between email newsletters and blogs. It seems Jason was taken by surprise by the popularity of the message. It’s a good’un, and well worth a read.

The market will tell you what it wants. You just have to really listen.

Full of advice and tips regarding startups and economic (and clinical) depression.

Since the outside market is out of your control, the best you can do is focus your energy inward. Here are some things you can do after you’ve assessed where you company is at.

  1. Execute better…
  2. Grow the talent you have … Invest in training and education of your top people, because they are the ones who will lead your company through this mess…
  3. Firing the average people… I highly recommend firing anyone who is good or average…
  4. Cut spending every where you can: Recurring costs like connectivity, phones, rent and insurance are things that you can easily cut. Go to each of your providers and ask for 20% relief immediately or you’re leaving…
  5. Find a revenue stream and ride it: If you don’t have a revenue stream right now, you’d better find one on Monday…
  6. Focus on your profitable clients: If you have revenue, start focusing on which clients are most profitable…
  7. Make your top ten 10% better: Look at the top ten aspects of your business and come up with a plan to make each 10% better in the next 30 days…
  8. Hold an optional off-site breakfast meeting on a Sunday and see who shows up: If folks don’t show up for you to grow/save the company on a Sunday for a two hour breakfast, they probably aren’t going to step up when the sh#$%t really hits the fan…
  9. Build marketshare…
  10. Raise money …Build a plan based on revenue and taking market share and folks will consider funding you.

Stowe Boyd responds to Jason:

There is a revolution in the works, and the spark for that often comes from deep despair when dreams are smashed by events. … perhaps now the green fields might not be media, but the actually development of green technologies and web solutions to tie that into our everyday lives. We need to move into a new tomorrow, and innovators and entrepreneurs still have a big role to play.

Fred Wilson also responds to Jason:

“I don’t think we are in a “depression” in startup land. We are in a down cycle driven by a bad global economy. I think the web and information technology is one of the few bright spots in an overall gloomy economic outlook”

Well, a few days later, and Seesmic certainly seem to be going through some tough times. Loic says that he has to let seven employees (1/3 of Seesmic?) go, partly because “advertising is plummeting”.

Gary Vaynerchuk (whose keynote at Web 2.0 Expo NY I really loved) is, as ever, up-beat. In this recent video he covers

ROI. I am talking about Return on the Investment of your advertising dollar. Traditional media advertising is incredibly expensive and doesn’t provide nearly the rate of return you can derive from intelligent web-based marketing campaigns in 2008 and beyond.

In the video, he theorises that print and TV media will struggle, but online marketing, especially adverts in social media websites should pick up business because of return on investment.

Oh go on then, I’ll embed it.

Some quotes:

You think it’s smart to buy this [newspaper] ad, Macy’s? I don’t. I think you get a twitter acount and start interacting with your community. Get 30 interns and you make much more ROI.

[Holding up a full-page magazine ad] Gucci would be far better off going to every watch blog and buying ads there. … The value they get on the backend is so much better, and they can track it. You don’t have to guess what it meant, you can track it.

So. A difficult week. Cause for optimism or pessimism? You decide.

6 replies on “The credit crunch, startups and optimism”

  1. Interesting. It’s easy to come up with lists like this, they appear to be sensible, if not blindingly obvious points, but I wonder how accurate some of them are.

    If you have a company made up 100% of the top, brilliantly amazingly dedicated people, I wonder how much stuff would actually get done. Are these the same people that would be happy to do some of the mundane tasks that anyone could do, but someone has to, or else the whole business falls apart? Or are they all wanting to be the leaders, setting the direction and proving how good they are? If you’re a two person company, clearly you need two brilliant people, but if you’re a 20, 100, 1000 person company, does that still hold true?

    Do people who buy Gucci really want to belong to some community of similar people they can relate to? Don’t they want to belong to a community of Mischa Barton, Paris Hilton and David Beckham? It’s easy to assume that things that work for the tech community translate elsewhere, but I’m not sure they always do. Isn’t the whole point of luxury goods to set yourself apart from the masses?

  2. Good point Darren, when I worked at IBM, I thought that this was one of their problems – they put so much effort into hiring only good people, but good people will quickly get demotivated when you give them rubbish jobs and they’ll find other more interesting things to do with their time, before eventually leaving.

    There are lots of different jobs that have to be done in an organisation, and you need to find people who are happy to do each one of them if you want to run efficiently.

    Setting yourself apart from the masses as a luxury brand is a double edged sword – the important thing for a brand like that is to have the masses envy. That’s why it’s important for luxury brands to spend money advertising to people who will never buy them. They aren’t supposed to buy them, they’re supposed to want them.

  3. Jason’s post is tough but reasonable to ride out the storm for the most part, but I have to suck my cheeks in at point 8.

    Sure, I’ll come along to a 2 hour long meeting on a Sunday, and I’ll bring the kids and some drawing pads too, shall I?

    I don’t know… does he have kids? In my experience, parents are the hrdest working, most reliable crew you’ve got. The reason? They are working their asses off for the sake of feeding their children, rather than the sake of a hopeful IPO (erm… hmmm… is this October 2000 right now?) or a trekking holiday in Patagonia.

    So suggesting something which will deliberately disadvantage anyone with young kids is a teeny bit stupid.

    Sorry Roo, I know it wasn’t your comment or anything. It just got me in a huff!


  4. Understood, Cait, and perfectly valid venting. I actually agree with you. I thought that was an ‘interesting’ tactic too, and likely to cause problems with dedicated employees who have perfectly reasonable family commitments.

  5. Darren is half-right about Gucci: The world of Gucci is the world of Beckham etc and people who want to be like them. Buying a load of ads on watch blogger sites would be (a) preaching the to converted, and (b) too low-rent for Gucci. Gucci needs to be seen in magazines which are, themselves, high-value brands.

    The fact that Vaynerchuk thinks Twitter’s reach and audience is equivalent to that of a newspaper also kind of shows he’s talking out of his ass. That kind of comment plays well with a tech/geek audience, but in the real world it’s pretty easily shown up as nonsense.

  6. Good points, all. Does he really believe the reach and audience are equivalent though? Or just different? One might argue that engagement is more important than eyeballs, after all.

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