Time, Timing and Being Timid

It’s common knowledge that a key factor in the success of any venture investment is timing. Enter a nascent market too early and you learn many lessons but burn though capital without gaining market traction. Enter too late and you end up going toe to toe with large companies who have had time, the key factor in this whole discussion, to react to emerging customer needs.

Right now, we are entering a very uncertain time. Investors are clearly and publicly tightening their wallets (I wont be the 10,000 blog to post a link to the Sequoia pitch) and quite rightly encouraging their portfolio companies to cut back. The natural reaction for any company is to hang on to their existing strategy, take a more hands on approach to execution (CEO as chief sales guy) and try to weather the storm – be it 6 months or 2 years.

The challenge is that recessions slow things down. Customers wait to start buying cycles, existing buying cycles get delayed and phantom buying cycles happen more often. In a recession, its less likely that an existing startup company will actually be able to carve out a viable market position with their current offering. The simple reality is that lengthening the adoption cycle both gives bigger companies time to respond and ups the odds that a new disruptive innovation will appear in the form of next-gen start-ups. The technology adoption curve gets elongated. Simply put, timing changes.

Start-ups build value by disrupting existing markets and creating new ones. New market dynamics should be met with new business strategies. Products, go to market strategies and economic models need to be re-thought. This is the reality of markets. Unfortunately, recession forces us to face this reality at the most inopportune time – when money is tight and often when we are scaling back on our plans, reducing spending and cutting staff. Exploring new strategies at this point is not easy. However, each downturn has spawned a new generation of startup who combined business and technology innovation to disrupt the status quo.

Simply put, now is not the time to be timid!