- Silicon Valley VC firm Sequoia Capital sent a memo to startup founders on Thursday, urging them to “brace for turbulence” during the coronavirus outbreak.
- The memo has been called “the sequel” to another famous warning that the firm gave to entrepreneurs in 2008.
- As banks were collapsing, Sequoia called an emergency meeting of its company founders to warn them of the worsening financial crisis and suggest measures for blunting its effects.
- The venture firm gave a slide show presentation pushing companies to make cuts and conserve capital.
- We’re sharing the full deck from 2008, titled “R.I.P. Good Times,” with Sequoia’s permission.
- Visit Business Insider’s homepage for more stories.
Entrepreneurs are learning it’s time to batten down the hatches in startup land.
Legendary venture capital firm Sequoia Capital sent a memo to its company founders and chief executives on Thursday, warning them of the potential business consequences of the coronavirus and its ripple effects. It described the pandemic as the “black swan of 2020.”
The memo, which has been posted online and has spread through all of “tech Twitter,” told company founders to prepare for the worst. The partners at the global venture firm have already seen startups suffer a decline in business activity and breaks in their supply chain. Fears of an economic downturn could make it much harder for them to raise outside funds, they said.
People on Twitter are describing the memo as “the sequel” to another dramatic warning from the firm 12 years ago.
On an early October day in 2008, Sequoia called an emergency meeting of its entrepreneurs, including Alfred Lin, a partner at Sequoia and a former executive at Sequoia-backed Zappos. Lin and others heard from a handful of partners and sat through a presentation on the worsening financial crisis and measures their businesses could take to blunt its effects.
The first slide had an image of a tombstone that read “R.I.P. Good Times.”
The weeks leading up to the meeting saw the collapse of Lehman Brothers, the bailout announced, and the worst week of losses in the history of the Dow Jones.
In Sequoia’s recent memo to founders, Lin shared a memory of the event.
“We didn’t know then, just like we don’t know now, how long or how sharp or shallow of a downturn we will face,” Lin wrote. “What I can confirm is that the presentation made our team and our business stronger.”
The deck, which we’ve shared with Sequoia’s permission below, includes some of the same recommendations that the firm issued this week in its memo.
Gloom and doom in startup land
The slide show presentation known as “R.I.P. Good Times” gave Sequoia’s company founders a gloomy forecast.
It predicted that venture-backed startups would raise smaller rounds at later stages if they could even secure a term sheet. They might see the number of exits slip, as companies take longer to go public, and the bigger companies change their acquisition strategy to conserve capital.
The firm told its founders that “acquiring entities will favor profitable companies,” and it would be necessary for them to become cash-flow positive to survive.
Cuts were a “must,” Sequoia’s partners said. Entrepreneurs would need to review employee salaries, potentially decrease headcount, and slash their marketing budgets — and they had to do it fast.
“Spend every dollar as if it were your last,” the deck read.
The firm’s recent coronavirus memo has been described as the “2020 version” of the “R.I.P. Good Times” deck, because of its take on the business landscape — and smart recommendations for any startup.
We’re sharing the full deck from 2008 with Sequoia’s permission.
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