I've seen a few blog posts about what the financial crisis means for startups. Jason Calcanis, most provocatively, calls it the Startup Depression and goes on to give specific things that entrepreneurs can do (scroll to the bottom). Fred Wilson offers up his thoughts as well including the fact that venture-backed companies are in better shape than angel-funded ones (read with slight grain of salt since it would serve Fred to make that point!). I've talked to several people in the startup and ad-funded world. There is some optimism that advertising will hasten from offline to more-accountable online mediums. That may be somewhat of a mitigating factor, but I'm skeptical. My advice and thoughts are:
- Advertising will decline. Plan on it so that you're pleasantly surprised if it doesn't happen. There will also be a 'flight to quality' even in digital, where money is spent on 'tried and true' sites vs. less-established ones.
- Take a hard look at your costs and cashflow. As Jason counsels, look to renegotiate contracts where you can. You can save good money this way. If you can even adjust payment terms from net 30 to net 60 or even net 90, it's better than nothing and you deserve a pat on the back.
- We will see more and more startups go under as their funding dries up if they can't show any significant traction. My sense is that they'll be in crowded segments like video sharing or social networking where there are large incumbents. And a lot of them won't be missed…I mean does the world really need another music recommendation/video sharing/social bookmarking service?
- Focus. Focus on the product and the features that will be needle-moving for your business. They could be 'boring' things like scalability and 'fit and finish' of what's there now and tweaking the UE to get better conversions.
- If you're thinking of starting a company, it will no doubt be harder to raise money. BUT, it will be easier to hire good people and you'll get more breathing room. Some of the best startups were born during down cycles.