Winter brings opportunities for the wise and frugal

One of my seed portfolio founders called for advice recently. He’d raised a Series A from a Tier 1 VC and was ahead of plan, but his investor suddenly wanted him to cut spending: on SEM, on PR, on whatever he could. He wanted to know why, and how to think about it.


Firms have portfolios to manage. The older the firm, the larger the portfolio. To make sure their portfolio is as healthy as possible, they often apply the same directives to conserve portfolio company cash in times of uncertainty and maximize flexibility over time.

Firms know their companies that need to raise this year will have a harder time than before, so the longer each company can last on its own, the longer the portfolio can last and the more reserves exist for those that need, and deserve, help.

In good times there’s lots of breathing room, which supports big portfolios. In leaner times everyone focusses on living off the oxygen they have, and there isn’t always enough to go around.

I am already noticing what a huge benefit it is to be a focussed, boutique firm with a concentrated portfolio in the land of the large and prolific. I’m doubly lucky because as a new partner I can almost exclusively focus on the future and the new opportunities it will bring, as I will soon suggest you do.

How to think about it

Every dollar you save today not only makes your company stronger, it leaves you with a dollar to do the work of two or more tomorrow.

Cutting fat is always good. PR firms for early-stage startups are almost always fat. SEM, without a business model to convert it, is also fat. Look at your spending; there’s lots of fat. Burn and fat go together. Lean and strong go together, too.

Don’t think of cutting costs as a forced financial diet, think of it as opportunities you are funding in advance. Fast today to feast tomorrow.

Very soon things are going to get a lot cheaper and easier to access; people, ad inventory, office space, acquisitions. I can tell you from experience, the money you save today will go a lot further tomorrow.

For those of you who haven’t lived through a correction

I have said for a long time we were not in a bubble that would burst, but a balloon that would deflate. I stand by that view. It won’t be as bad this time, but it will parallel the past.

I founded in 1993 and took it public in 1999. Then the world came to an end.

We had plenty of cash, but no more path to profitability (we were profitable pre-IPO). We had to cut; but what I learned that can benefit you was what I saw as a seller, not as a spender.

We had pioneered the concept of cost-per-click and charged a dollar. When the bubble burst, everyone simultaneously needed revenue and flooded the market with inventory. Existing sellers cut prices to compete. Soon we were begging for quarters-a-click.

The same thing was true for service industry folks, employees and anything and anyone that had enjoyed the largess of easy investment-dollar-fueled spending.

Every dollar you save today not only makes your company stronger, it leaves you with a dollar to do the work of two or more tomorrow. For the brave, wise and supported-by-their-board, this is an opportunity not to obsess but to progress. Not headlessly, but logically and frugally.