Yesterday I mentioned a presentation by the tech VC firm Sequoia Capital, about what the financial contraction would mean for start-up businesses and the tech economy in general.

After the jump, extra notes on the presentation from someone at the meeting.

This account appeared first on a subscription-only site, TheFunded.com, so I won't quote very much of it. But even a brief sample suggests that when future economics teachers want to give their classes a concise lesson in how economic downturns spread, or what a "vicious cycle" means (a term prominently misspelled in the Sequoia presentation itself, one of several signs of a rush job), they can use this session as a convenient example. Thus:

The VC firms warn that tough times are at hand; their advice is that all their startup companies cut, cut, cut, laying off as many people as possible and eliminating every purchase or investment they don't absolutely need to survive. The startups do that-- and then the companies they used to buy from have to begin cutting drastically themselves, as do the people all these firms have just laid off. Everyone is buying less, and... The point is right out of Ec 101, but this is a particularly clear and real-time example.
_______

Brief excerpts from the account on TheFunded.com. That account identified various speakers by name; I've omitted the names, which in any case are included in the original slide-show presentation, and just given some of the gist. The account begins with a two-paragraph cover note from the person reporting.

"Today, Sequoia Capital hosted a mandatory CEO All-Hands Meeting on Sand Hill Road (where else?). There were about 100 CEO's in attendance and let me tell you, the mood was somber. I'm not one to perpetuate doom and gloom or bad news, but let me underscore this for you: We are in a serious economic downturn and this is just the beginning. Immediate, decisive and swift action is required, along with frugal, day-to-day management of expenses and our business is required.

***Here are my notes from the meeting. Keep this note in your in-box and read it every day. I'm serious folks, this is for our survival.***.  ...

(One speaker):
- The only time Sequoia's assembled all CEO's like this was during the dot.com crash.
- We are in drastic times. Drastic times mean drastic measures must be taken to survive. Forget about getting ahead, we're talking survive. Get this point into your heads....

(Next speaker):
-- Survival of this storm means drastic measures must be taken now, so you will have the opportunity to capitalize on this down turn in the future. ...
- Inflection point: Make changes, slash expenses, cut deep and keep marching...

(Another):
-- You must cut expenses. Now and deep.
-- Your product should reduce expenses and drive revenue....

- Operations Review [jf note: that is, reducing staff]
-- Engineering: Since you already have a product, strongly consider reducing the number of engineers that you have...
-- Marketing: Measure everything and cut what is not working. You don't need large Product Marketing, Product Management teams.
-- Sales & Business Development: What is your return on this investment? The Valley has gotten fat with Sales people: Big bases, big variables. Cut base salaries on sales people, highly leverage them with upside (increase variable) and make people pay for themselves via increased sales productivity. Don't add sales people until you've achieved your goals with sales productivity. Be disciplined....
-- Finance: Defer payments, what is essential? Kill cash burn...

- Cutting deeper is the formula for survival.

Sane advice, I assume, for startups that want to live on. But not hard to imagine the ripple effects in the regional economy and more broadly.