Steve Parks

Without doubt the challenges for entrepreneurs are intense at the moment - but the opportunities are still there, and those that get their business quickly in the right shape and doing the right (focused) things will come out the other end stronger and more successful.

I've been doing a series of posts on what it takes to achieve this, and in this one I'm looking at the concept of Lean Startups.

'Lean' was developed by Toyota as a way of massively improving their business, and its since been successfully applied in many industries.

So how can you apply the ideas in startups?

Here's a collection of articles you need to read!
http://startuplessonslearned.blogspot.com/2008/09/lean-startup.html
http://venturehacks.com/articles/lean-startups

Here's a slideshow of a presentation on the subject:

And here's an audio podcast of a speech on the subject:

A lot of food for thought here. What are the key ideas you pick up from it all?

The Silicon Valley blogs have been buzzing over the last few days with details of a number of presentations and letters to hi-tech companies by their venture capital backers. These presentations were designed to inform CEOs about the outlook for the economy, and share the experiences and advice of the investors - all with the intention of helping their companies survive.

I'm going to summarise them here, because they give a very interesting and insightful perspective - and some great advice.

Sequioa

Sequia Capital is possibly Silicon Valley's most respected venture capital firm. They've backed many of the web's best-known companies from their first steps.

Last week they held a meeting for the CEOs of their investee companies - with the intention of delivering a short sharp shock.

Here are the slides from the presentation:

The analysis in here is fantastic - and well worth studying in depth. But the key messages are:

1. This is not a short term problem. Prepare for tough years rather than months. Don't expect bumper good times to return for 15 years.
2. You need to make sure your company is cashflow positive.
3. You need to cut costs (but smartly - my addition), reviewing salaries, using commissions and other performance incentives - and using zero based budgeting (more in a later post on this).
4. Focus on only the genuinely valuable and likely sales in your pipeline, get rid of the noise.
5. Spend every dollar as if it were your last.

Benchmark Capital

This VC firm has lots of similar advice, but it was particularly interesting to read them quoting a CEO they know who went through the dotcom crash...

Recently, I spoke with an entrepreneur who as a CEO during the dot‐com crash and oversaw a headcount reduction from 130 to 28 (through two major layoffs), and eventually back to profitability and an IPO. If you think a 10% layoff is tough, imagine laying‐off 78% of your employees. It is one of the hardest things I have ever seen anyone do. I recently asked him how that experience has shaped the way he ould advise people on running a startup. He had a list at the tip of his tongue (included now):

1. You don’t realize how fast things spin out of control. There are self‐reinforcing negative affects in a downturn.
2. Don’t spend money until you have to
a. Don’t move out of your office until you are sitting on top of one another
b. Don’t hire any incremental employee until you just can’t stand it
c. Don’t get more capacity in your data center until your site is going down
3. Better to be “late to the party” than to be early and run out of money
4. Line item review of the budget every month (legal, accounting, everything)
5. Not just a CEO mindset, but a company mindset
a. Everyone must buy into the process
b. But in a calm way - not run for the hills
6. Create 2 or 3 different burn scenarios - know at any point in time how many months of cash is left.

Ron Conway

And finally, angel investor Ron Conway sent these emails to the companies he has stakes in.

In summary

All three of these experienced investors give similar advice - essentially:
1. Cut costs wisely
2. Plan for this lasting a long time
3. Don't expect to be able to raise outside funding
4. Watch the cash flow like a hawk!
5. Act quickly

I'll be writing more blog posts soon about the economic situation and what it means for entrepreneurs in terms of threats - and opportunities.

The gravity of the economic crisis will not have escaped you. You're probably well aware that there is no quick fix and we're in for a long hard couple of years.

But this doesn't mean entrepreneurs should despair, panic or get out of the game. Imagine if lots of pipes burst creating a big flood - and all the plumbers decided to give up?

It's entrepreneurs that the world is relying on to get out there, run their businesses, employ people, create real value and fix the global economy.

The small-minded managers in big businesses are going to get it all wrong. That's guaranteed. They'll cut spend on marketing, training, product development and quality. They'll run big voluntary redundancy schemes in which the best people will choose to leave because they are the ones that can see opportunities elsewhere - so the big companies will be left with the poorest performers. They will drive cost down, with a short term benefit, but a huge long term price to pay - as well as further impacting the current economic crisis. And they'll have a big payoff waiting for them if they mess up and get booted out.

So we're all relying on you - the big thinking managers in small businesses. You're the ones that actually make things, do things, and serve people.

Entrepreneurs do need to respond to the current situation, ensuring the survival of their businesses - but then they need to be quick to respond to the opportunities that present themselves in any adverse situation.

This will be the time to hire great talent at affordable rates. This will be the time to get great deals from suppliers, and on new equipment. This will be the time to get ahead of your competitors.

Over my next few blog posts I'm going to be looking at the different aspects of the threats and opportunities, what it takes to ensure a business survives - and how to find the new opportunities.

In the meantime here's a summary from the BBC of the events that led to this economic crisis.

Find Your Lightbulb: How to Make Millions from Apparently Impossible Ideas author: Mike Harris asin: 1906465045

Last week I had the privilege to meet an unusual entrepreneur called Mike Harris. You might not recognise his name, but you'd definitely recognise the names of some of the businesses he started: 'First Direct' and 'Egg'.  read more »

This weekend I'm continuing my summary of the Government's publication "Enterprise - Unlocking the UK's Talent", which sets out it's research into enterprise in the UK, and it's plans for encouraging and supporting enterprise in the future.  read more »

Continuing my series summarising and analysing the UK government's Enterprise white paper, let's look at some of the statistics they present that give an insight into the current picture of enterprise in Britain...  read more »

Today I'm reading through the UK government's document "Enterprise - Unlocking the UK's Talent", known as the Enterprise White Paper.

Yes, maybe I need to get out more.

Anyway, I'm going to be blogging about interesting findings as I come across them.

Firstly, they are aiming to achieve:
• a greater proportion of people with the ambition to start and grow a business;  read more »

In browsing the blog of Saul Klein this evening I saw a post he'd written on Kiva - a micro-lending community to support entrepreneurs in developing countries.  read more »

I've just had more news about international versions of my books. An Italian edition of 'How to be an Entrepreneur' is in the works, and will be published early next year.

But don't expect my language skills to come up to scratch to do an Italian version of the Audio CD of the same title!!