A Startup’s Recession Survival Guide
We have entered the tech industry’s second major economic winter in less than a decade and no one knows for sure how long this one will last. That makes planning a recession survival strategy a tricky undertaking.
Nevertheless, Red Herring interviewed a number of entrepreneurs who survived the dot-com bust along with VCs, and industry analysts and came up with a recession survival guide for startups.
First the basics: Get lean. Eliminate resources that don’t add measurable value, and streamline the company’s organizational structure. Most successful telecom startups have already done that.
In the last 15 years the telecom market has faced a series of challenges: the rise and fall of fiber, Web 2.0, the massive dot-com crash, the rise of wireless, and unprecedented consolidation.
Re-establish relationships with company partners. Large companies are also getting lean, so in many cases the unit with which a startup does business may be in trouble. Help your vendor contacts make their survival cases.
Be more flexible about being acquired. A late-stage, VC-backed firm with a solid customer base will be far more attractive to large companies than an innovative early-stage startup with no real market.
“The question will be the valuation, but at this point everything’s for sale, it is just a matter of settling on a price,” said Gerald Wesel, who successfully weathered the last downturn as the CEO of Ellacoya, which has since been acquired by Arbor Networks. Mr. Wesel is currently an independent consultant. “Think a combination of cash and stock.” (Arbor Networks Grabs Ellacoya)
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