More details on Sequoia’s economic “inconvenient truth” meeting

Updated

Sequoia Capital, a premier Silicon Valley venture firm, held a meeting on Tuesday during which it told its portfolio companies to cut costs and prepare for an economic downturn that could last many years.

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The presentation, one attendee tells me, was like the global warming wake-up call movie “An Inconvenient Truth.” But instead of Al Gore running through a bunch of slides about the environment, it was billionaire investors running through a bunch of slides about a “very cataclysmic” economic future.

Here are presentation excerpts and comments drawn from a leak posted on GigaOm and left in comments on Silicon Alley Insider. Our sources have confirmed their accuracy.

Mike Moritz, General Partner, Sequoia Capital:

• “We’re talking survival. Get this point into your heads.”
• Companies need to be cash-flow positive, if nothing else in order to justify additional funding

Eric Upin, Partner, Sequoia Capital, formerly ran Stanford University’s $26 billion endowment fund:

• This could be at least a 15-year downward cycle, judging by historical trends; the credit market will take a long time to recover
• Startups need to deeply cut expenses, and throw out existing projections

Michael Beckwith, Partner, Sequoia Capital:

• A dramatic recovery is unlikely
• Spending cuts will accelerate through this quarter and into next year
• Only lean companies with proven sales models will be acquisition targets

Doug Leone, General Partner, Sequoia Capital

• Get aggressive with public relations communication strategies; cut marketing that doesn’t work
• Offer a product that reduces expenses and drives revenue
• Preserve capital over trying to gain market share
• Begin with zero-based budgeting to help prioritize necessary expenses
• Have at least one year’s worth of cash available
• Reduce expenses around products and boost sales; if product is ready, cut engineers (wow)
• Build essential product features first
• Reward salespeople based on commission, not base salaries

The final point: Get real or go home

Also, if anyone has a copy of the actual Sequoia presentation that they’d like to send over: eric (at) venturebeat (dot) com. Update: Here’s the presentation.

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