Gustavo Ballvé on June 5th, 2012
Corporate Strategy, Food for thought, Home, Investment Themes, Mental models, Portfolio Management, Risk management

I’ve read this article on funding for start-ups thinking about something else, but the truths spelled out in Paul Graham’s email for entrepreneurs apply to larger, more established companies – and for all moments as well. Very interestingly, the article links to a 2008 presentation by Sequoia Capital called “R.I.P. Good Times” that also has “timeless” parts (although it starts with a lot of time-specific remarks). A few highlights from both documents inside.

The lines to remember the most from Mr. Graham’s email:

“The best solution is not to need money. The less you need investor money, (a) the more investors like you, in all markets, and (b) the less you’re harmed by bad markets.

I often tell startups after raising money that they should act as if it’s the last they’re ever going to get. In the past that has been a useful heuristic, because doing that is the best way to ensure it’s easy to raise more. But if the funding market tanks, it’s going to be more than a heuristic.”

From the Sequoia presentation above, slides 44-54 are very interesting – especially the parallels the Sequoia presenter draws from the dot-com bust in 2000. Slide 46 in particular calls my attention because I’m naturally drawn towards those features in a company’s strategy/business model, even though the slider in that page can and should be taken to the right side at some points in the company’s life, depending on their strategy (but that’s another issue). The message is the same: be conservative in cash management and even expectations.

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