Words to the Wise When the Exits Are Closed
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really hadn’t had a good handle on our operations and metrics. Get to ‘great’ on operational excellence, and from there you’ll have many more options.”
—Use smaller chunks of time as benchmarks, because shortening the business cycle provides more insight into your market dynamics, Gentile said. He runs Jaspersoft on a 30-day business cycle instead of the standard 90-day business period. “So if you go through two 30-day periods and you see no revenue growth for two consecutive periods, you can make adjustments before the end of the quarter,” Gentile said. “Otherwise you don’t see what’s happening until after the quarter has ended, and by then, you’re a month behind in terms of cutting your costs.”
—It’s better to reduce your burn rate than to try to raise capital. Every venture round is a distraction, said Alex Vieux, the Red Herring publisher and tech conference organizer. But the distractions multiply if you try to raise capital while there are contractions in valuations. You have to deal with prior investors who feel they’re being diluted or washed out.
—If you have to raise capital, be careful about choosing the other venture investors to be included in your syndicate. “You have to think these things through,” Malloy said. “You have to anticipate the worst before you take that first dollar of capital. The good news is that you don’t need to raise as much capital today. But you really have to think about how you put your syndicate together and who is going to be there with you further on.”
Ackerman agreed, and added, “When you syndicate, you are introducing new variables into the equation. And you are multiplying your problems. So if your syndicate partner has a problem—they’re out of capital, they’re dysfunctional—their problems become your problems, only magnified.”