Venture Capital Firm Warns Startups of Impending Credit Crunch Effects

By Chris Preimesberger  |  Posted 2008-10-09

Venture capital firm Sequoia Capital, known for backing IT mega-hits such as Google, Apple and YouTube, Oct. 9 became one of the first VC firms to issue a strict advisory warning to both startups and established companies in their portfolios to trim expenses, cut ancillary jobs and contractors and tighten budget belts.

Web 2.0 blogster Om Malik reported that Sequoia started a board meeting Oct. 8 by showing an image of a gravestone and the phrase "R.I.P.: Good Times."

"The credit crunch is hitting tech land like the proverbial Category 5 hurricane," Malik wrote.

The message delivered to those in attendance was that things could get a lot worse than people think, and it will be a more protracted downturn, Malik wrote.

"To give a historical perspective, Sequoia had a similar meeting back before the last bubble unraveled. We know how that turned out," he wrote.

Sequoia is not the only VC investor involved in IT startups to issue this advisory. Angel investor Ron Conway also has advised the startups in his own portfolio with similar ideas on how to cut costs to survive until it is possible to raise funds again.

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