I guess I can’t stay out of the conversation on this any longer.
I am no expert in downturns, recessions or being poor. But I have a feeling a lot of us are going to learn about at least two, and possibly all three of those things. We are in for a bit of a rough ride, and contrary to what you might be hearing, we might be in for a longer and more difficult few years as startups here in Canada.
Things haven’t be rosy lately, we have written a lot about that, but it has had very little to do with the current situation. Capital for startups in Canada has been tight for years, and the slow deaths of many of our Venture Capitalists have been because of poor performance (among other things) rather than tightening credit. Now, we have both.
We have Venture Capitalists who were having enough trouble raising funds and who will now have almost no hope of raising capital. This is not good for anyone.
So, what can you do? How can we work around this? What will the next few years look like? I don’t know for sure, but I can tell you what I am doing:
Get your personal finances in order. $200 cable TV bill? Get rid of it. $70 gym membership? Gone. Constant and expensive use of your cellphone? Goodbye. It is going to be different for everyone, but you need to build up a small nest egg if at all possible. I’m not telling you to stock up on canned beans, but if there was a time to learn how to manage your personal finances, this is it.
That bread and butter contract you do on the side to pay the bills? It could be gone tomorrow. You need to know what you are spending and why, and you need to know where you can cut when things get tight.
Know your cash flows! Ever since you did a cash flow statement when you started your company, you may not have gone back and reworked your projections, instead you have probably just let you accountant keep them up to date, but have not looked at things too closely. You know your hiring schedule, and you know how high your expenses can be ever month, but you now need to make sure your projections a year out are still solid.
How vulnerable is your revenue stream? Which cost-centers can you get rid of quickly and efficiently if you have to bring your burn rate down? You need to know when to pull the trigger, and where to shoot. When the time comes: Just do it.
Just raising financing? Get to revenues fast, within 6 months, there is less time now to prove out a model over the long term, it is important to compress your cycles a bit for a few reasons. You need to be able to test and learn more, with less.
Are there better target markets? Those of us in the Enterprise space are going to be in for a bit rougher of a ride, but we also have an advantage. If we are building a product that saves the customer money, and are selling to them based on ROI, then there is even an opportunity here. If your software creates efficiency, reduces complexity or streamlines and existing product, then you have something to sell.
If on the other hand, your product is focused on less tangible benefits, then you are in for a slow period. This is going to effect a lot of Enterprise 2.0 startups who haven’t narrowed down their product offering yet.
On the consumer side, things probably aren’t a lot different. If you are trying to change behavior, this is going to be a terrible time to try to do it. If however, you are making someone’s life easier or more enjoyable, then they will be able to see the value and you have an opportunity.
These rules all apply any time, and even more so now.
Don’t head for the hills. This is a time when a lot of people are going to have to go get jobs. Some of us will have to, there just won’t be any choice, but it is not the time to do it if you can help it.
You are going to create some of your most incredible products and companies during down times. Hunger and frugality (the traits of great entrepreneurs) are rewarded in times like this. Flashiness and and excess will no longer be looked at in the same way they might have been in the last few years. This will be true here in Canada and everywhere.
The need for revenue will force you to pick up the phone that much sooner, or to get your product to market that much more quickly.
This might just be our time. Canadian Startups, who have been hungry for years now, have a chance to shine. We have been building companies that people called un-ambitious. We were told that we did not think big enough and that we were too risk averse. That may have all been true (and I think it was, when people were saying it in the last few years), but we now need to swing this to our advantage.
Lets lead the way and teach the world how to grow great companies in the middle of an economic drought. You’ve built a capital efficient business, you have a strong customer base and a product people want.
Don’t slow down now, this is just the time to make a break for it.
Well, I read it once, will read it again, and see what I will do. You made me think here…
Well, I read it once, will read it again, and see what I will do. You made me think here…
Nice work Jevon,
It really is an interesting time in the market right now. So many unknowns.
Your advice above rings true for many companies. It will be tough for venture backed companies who have a target goal which if they miss will = failure. One thing I have noticed after living through 2 seasons like this before and being in business is that if you have something of value, people will still buy it. I think one of the best things we can all do is re-evaluate our value proposition to customers and enhance it any way possible. Times like this can make us more creative, more agile, and aggressive. All good for us Canadians…
Nice work Jevon,
It really is an interesting time in the market right now. So many unknowns.
Your advice above rings true for many companies. It will be tough for venture backed companies who have a target goal which if they miss will = failure. One thing I have noticed after living through 2 seasons like this before and being in business is that if you have something of value, people will still buy it. I think one of the best things we can all do is re-evaluate our value proposition to customers and enhance it any way possible. Times like this can make us more creative, more agile, and aggressive. All good for us Canadians…
Last year, in our quest to be as open and transparent as possible, we started to “promote” the fact that we were a Canadian company (90% of our customers are international). Initially we worried about how some prospects might perceive this but it’s turned out to be a recognizable asset for us. Canadians are generally seen as trustworthy, dependable and capable which reduces barriers to doing business online and creates a competitive advantage when selling our service. I expect with these uncertain economic times the “better off” Canadian economy, political status and banking system will further enhance our profile.
They love our accent too eh.
Last year, in our quest to be as open and transparent as possible, we started to “promote” the fact that we were a Canadian company (90% of our customers are international). Initially we worried about how some prospects might perceive this but it's turned out to be a recognizable asset for us. Canadians are generally seen as trustworthy, dependable and capable which reduces barriers to doing business online and creates a competitive advantage when selling our service. I expect with these uncertain economic times the “better off” Canadian economy, political status and banking system will further enhance our profile.
They love our accent too eh.
Great post. Times like these force all of us evaluate what are “must-haves” and “nice-to-haves” in both the personal and professional areas. I have worked for other startups who have done more with less than those that are flush with cash. It is not going to be easy but there will be companies that survive these lean times because of the resourcefulness and focus of their leaders and management teams.
Great post. Times like these force all of us evaluate what are “must-haves” and “nice-to-haves” in both the personal and professional areas. I have worked for other startups who have done more with less than those that are flush with cash. It is not going to be easy but there will be companies that survive these lean times because of the resourcefulness and focus of their leaders and management teams.
i disagree, the sky is not falling. this post is more alarming than it should be, especially in the beginning. most canadian companies and banks have been conservative, compared to the US, and you can’t just tell them to be even more conservative.
my 2 cents
i disagree, the sky is not falling. this post is more alarming than it should be, especially in the beginning. most canadian companies and banks have been conservative, compared to the US, and you can't just tell them to be even more conservative.
my 2 cents
The idea that because our banks are stable we won’t feel the punch is a fallacy. There has always been a tight squeeze on capital in Canada, and now it is going to get even tighter.
Perhaps you know something I don’t, but I think we are in for some belt-tightening for at least a few years.
That said, the point of the post is that this is an opportunity for Canadian startups, which I cover at the bottom of the post.
The idea that because our banks are stable we won't feel the punch is a fallacy. There has always been a tight squeeze on capital in Canada, and now it is going to get even tighter.
Perhaps you know something I don't, but I think we are in for some belt-tightening for at least a few years.
That said, the point of the post is that this is an opportunity for Canadian startups, which I cover at the bottom of the post.
Jevon, I don’t have access to special finance data.
I don’t think the biggest issue Canadian entrepreneurs has to face is not credit facilities. I think Canadian entrepreneurs have to be more creative than relying exclusively on the US market.
Moreover, on a personal note, I refuse to admit that the tech and startup sector in Canada should suffer because of a dysfunctioning US finance sector & mortgages and home credit problems
Jevon, I don't have access to special finance data.
I don't think the biggest issue Canadian entrepreneurs has to face is not credit facilities. I think Canadian entrepreneurs have to be more creative than relying exclusively on the US market.
Moreover, on a personal note, I refuse to admit that the tech and startup sector in Canada should suffer because of a dysfunctioning US finance sector & mortgages and home credit problems
Well, same reaction…..Time to talk to ex-wife and ajust claims and liabilities
Well, same reaction…..Time to talk to ex-wife and ajust claims and liabilities
http://www.clusterstock.com/2008/10/why-canada-isn-t-broken
http://www.clusterstock.com/2008/10/why-canada-…