ETRE 2008 – day 1, part 2, some small companies get hosed, and innovation

The ETRE first day afternoon was split into two parts. The first part was a kind of Dragon’s Den challenge for a bunch of entrepreneurs. It was painful. At times it was almost brutal. Almost no one escaped alive. As an entrepreneur I decided not to relate the true gory horror of the event. You will simply have to imagine it.

The meat of the afternoon was a series of one-on-one presentations by entrepreneurs where the audience was self-selected. I greatly enjoyed a couple of them and found that there were the same key themes repeating time after time.

The day closed with two panel sessions. I chose to go to the innovation panel. Well, I would, wouldn’t I?

And here are the headlines:

Innovation is a process.
Innovation adds value.
Innovation is something that everybody in the business must participate in.

The best bit of listening to the innovation process panel was that Silicon Valley venture capital companies were said to be “fighting quotes of the last war”. That is, they are still trying to apply the lessons they learned from the 2001 technology slowdown to be 2008 international global credit crunch. And the important fact is this is completely different. In 2001 it was really only those technology companies which slimmed themselves down to half their previous size and squeezed through on limited cash burn that actually survived to generate wealth in 2002 and 2003. However “this war” (post Credit Crunch) is about using the cash you have to innovate as rapidly as possible. That innovation has to include product innovation, business process innovation, business plan innovation, and customer targeting.

My favourite quote of the afternoon was “if you have cash now is the time to go and rip the throat out of your competitors.”

It was made clear by a wonderfully experienced venture capital partner, that the  very best years in which to have made investments were the years immediately after the previous serious crashes. So, if you invested in 1974, 1987, or 2001/2 you made some very serious money. It was widely believed, that right now values were low, but the rebound would be large, and that competitive retreats by large companies had led to a huge increase in the amount of white space that could now be colonised by smart and agile tech startups.

I came away from the innovation session having realised that there were some amazingly clever venture capital companies with serious long-term investment profiles who were not only ready, but willing, fully capitalised, and in many ways determined, to buck the negative trend that seems to be emanating from places like Sequoia capital(*), and their ilk.

Rock on, innovation!

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(*) I've since reread the Sequioa Capital slides that formed their 2008 advice to CEOs. and find that many people have misrepresented them. It is not a portenious message of doom. It is not a “run to the hills with canned food and shotguns” message. Reading them all to the very end a few times and what comes out is some plain common sense that actually advises companies to cut costs AND be smart. Assuming Sequioa has properly capitalised its portfolio, CEO's would be well advised to read the whole lot and work out what the success path is for their own particular company.

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