The weather is crappy here in Boston, reflecting the overall mindset (despite the excitement around the Celtics). Yesterday was also a crappy day, both for 401(k)s and for the mood of the technology community here, what with the news of Matchmine’s abrupt ending.
We got to talking about the history of Boston’s tech community—Adam has survived more than one downturn over the years—and then the conversation turned to how we are positioning ourselves for the downturn. After sharing how my company positions itself, he questioned, given the current economic slump and growing concerns over the viability of the many startups which have banked on low-revenue “if you build it they will come” business models, whether “web 2.0″ is a term anybody will want to associate themselves with a year from now.
His question is a good one, and the answer doesn’t just involve incrementing the integer and moving on. It involves retrenching and rethinking your business model before it’s too late. Advertising Age’s Michael Learmonth puts it best:
Raising money for an ad-supported web business is going to be tough for anyone who can’t demonstrate a clear, relatively quick path to profitability, and advertisers are about to get a lot more conservative than they’ve been for the past three years. Marketers likely won’t decrease their online spending, but they’ll be under pressure to justify it and show results, which means a flight to search and proven sites and less experimentation with social media and new platforms such as Meebo, Twitter, FriendFeed, Drop.io and even YouTube.
This bodes poorly for both startups and established companies with heavy ad revenue business models.
So what’s a company to do? Here’s my advice:
- Don’t panic! The Hitchhiker’s Guide put it best. In tough times, humans tend to panic and behave irrationally—don’t spook the herd. We can smell fear, but will also cling to stability.
- Focus on keeping the business that you have. If you’re in services, touch your clients every day. If you’re a product company, think about how you can reward loyalty.
- Prune, don’t chop. Tempted (or forced) to cut your budgets? Do it carefully, and don’t cut your lifeline!
- Ask for more. No, NOT from your financiers, from your customers. You don’t have to ask for a lot, just a little. And it doesn’t have to be money, it can be publicity.
- Rethink, but don’t react. Rethink your business model, not for the current downturn, but for the next boom: are you positioned to survive until it comes, and thrive once it does?
- Check in with folks. Silence definitely can be deadly, especially when it comes to customers and capitalists. With your survival guide and thrive plan in hand, give your VCs, angels and biggest customers/partners a call, please.
I entered the job market during the recession of the early 90s, and remember clearly my company being listed on Barron’s infamous “Burn List” article that heralded this decade’s dot-com crash. Today, I’m watching sites like FuckedStartups closely (oh how I miss FuckedCompany though), especially as I think about my research calendar for 2009.
So I know that today’s rain will end, and the economic downturn will also end. Boston (and the US in general) has at least one more good tech boom in the cards, probably more. Meanwhile, my heart goes out to some amazing people who today are facing a new day with gloom inside and out. Fear not, for “this too shall pass.”