Author: Jonas Brandon

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.