

Surviving in a Downturn - run4yourlives
http://davidpiccione.com/blog/surviving-bust-20-success-in-a-downturn/

======
nostrademons
Couple things:

1\. The #1 thing you can do to protect yourself in a downturn is _"Don't spend
money."_ I interviewed at a dot-com in 2002 and know a few others that it made
it through. The features they all had in common were that they were just a
couple of founders working for subsistence wages, they had simple professional
offices (just a couple of rooms), their furniture consisted of yard sale
castoffs instead of Aerons, and their only employees were an intern or two and
maybe someone working mostly for stock. You see this with more famous
companies too: Flickr, HotOrNot, del.icio.us, they were all just a couple guys
during the bust.

By contrast, the VC-funded startup I worked at from 2000-2001 flamed out in a
spectacular way, as did most of the other venture-funded organizations. The
only VC-backed startups to make it through were the ones that had been started
in 1995 and 1996 (well, except Google) and had already begun to dominate their
market niches. Even those were touch-and-go for a while: Akamai stock was down
at $0.50 for a while, and there was some serious doubt over whether Amazon.com
would make it through.

2\. "In the depression, people were so concerned about making money that they
actually took on extra jobs instead of having fun, which as seen as frivolous
and risky."

That's actually not true. The 1930s are often seen as the "golden age" of the
motion picture, because no matter how hard up they were for cash, people still
went out to the movies. Walt Disney got his start then. Bootleggers and
bordellos also did well during the 1930s. Radio did well in fundamentals, but
their stock was hit hard because they were trading at P/Es > 100.

The whole point of the depression was that there _was_ no work to be found.
Very few people worked extra jobs - even if there were jobs to be found,
companies were loath to give them to someone who already had an income when
25% of the population was begging in the streets. Many people tried to
supplement their income with eg. selling apples on the street, but even more
stayed at home and sulked. There was a major sex role reversal: women often
found themselves the primary breadwinner, doing piecework out of their home,
while the men found themselves unable to get any sort of work and eventually
gave up searching.

------
menloparkbum
These articles are poorly written, and the content is not only wrong, it is
self contradictory. Paul Graham was right in suggesting that these articles
are trolls. Sadly, I think it is a case where the author of the troll is
sincere.

The author describes three traits of businesses that will fail during a
downturn: based on ad-based revenues, being fun or recreational, and being
innovative. Earlier in the article he says: "Back when the sector was hit hard
in 2000, there were companies that managed to survive and grow."

It is interesting to note that one of those companies that managed to survive
and grow during the last downturn was ad-based, innovative, and also could be
considered "fun" and "recreational." Google, anyone?

~~~
run4yourlives
Thanks for the comment.

I think though that it's important to pay attention to what I'm actually
saying and not react purely on emotion. Having an emotional response might get
me labeled as a troll, but it also shows from the fact that pg, and now you,
are insinuating a point and then arguing that, instead of actually countering
what I'm directly saying.

For example:

>The author describes three traits of businesses that will fail during a
downturn

Actually, I don't say that anywhere. What I do say is: "When you're adjusting
to survive, be sure to stay well clear of the following traps below". All
three of those items are risky positions to place oneself in, and they become
doubly so when money isn't flowing as fast as it is now.

I don't see how pointing out risks is contradicts the fact that you can be
successful in mitigating those risks.

>Google, anyone?

Google is an anomaly. It's very bad strategy to formulate expectations based
on the performance of an exception to the rule. Unless you are that one
company, odds are you'll end up in the heap of has beens.

Besides, I point out in the article that Google did in fact innovate right
through a recession to great effect.

------
sabat
This one clears things up.

Here's where I think you "went wrong" (so to speak) in the first article: you
spoke of a possible downturn in the economy as a "dot-bomb". To us startup
types, that says "party's over, give up your projects, go home". I know, you
didn't mean that. Today's post made that clearer. It was the language you
picked that caused a lot of the backlash. That, and questioning whether ad-
based services are much more than a fad. :-o

Truth is, a downturn (self-prophetic or not) is always a possibility, and
preparing for to insulate yourself is just good common business sense.

Saying "hey, it could happen, nothing's a sure thing" would resonate with
everyone here, I imagine. Getting (perhaps too) specific and suggesting that
the "Web 2.0" market (whatever that exactly is) will die Any Day Now is bound
to get people irate because:

1- there is no actual reason to believe that there's anything going wrong in
the web economy

2- you cannot have a 2000-style crash when the stock market isn't very
involved with the businesses

3- just about everyone here is heavily invested in working the web economy,
and so we don't take kindly to what we perceive as groundless doom-and-gloom.

Most of today's startupians want a buyout as an exit strategy -- or to become
self-sustaining for a while. To me, there isn't a lot of difference between
your John Chow (www.johnchow.com), successful blogger, and your self-
sustaining web business (I'll point to plentyoffish yet again). Er, except
Chow doesn't make the kind of cash that the dating site does. Me, I'm not sure
I'd mind that much. I'll take small success over none.

The 2000 dot-bomb happened because of three interconnected reasons, in my
estimation:

1- all the dumb, no-profit businesses burned through their VC money

2- the stock market got impatient and wanted to see some profits

3- VCs got spooked and stopped funding

That won't happen again. Something else? Maybe, but it will have to be a cause
quite different.

Myself, I'll bet if something causes us heartache, it will be a downturn in
the economy, most likely caused by the population believing that we're "due"
for a downturn in the economy.

As PG would point out, as long as we keep trying to find ways to create wealth
(not so much by making literal $$ but by improving the world), downturns
cannot last forever.

