VC Advice to a Portfolio Company

By David Hehman     Add your comments

When economic times are tough, you need good advice and strategy to stay the course.

As you gain investors, you also can get some great advice about how to grow your company. Here’s what one VC wrote to one of the companies they had invested in, as it faced some growing pains, facing a recessionary environment. Read it as if the VC were talking directly to you. Remember, the VC is on your side.

“Your goal should be to build a great, big growing business with strong fundamentals. The outcome will take care of itself. Invest in the asset and build value. Keep pushing on the things you’re learning and having success with. That is what I want to invest in and believe has greatest chance of large long-term value.

Do not think about the business in terms of how best to position it for acquisition at the end of the road (technology asset, etc). I feel very strongly about this. Do not retrench and go into aggressive cut & cash-flow positive mode.

The environment will be tough over the next 24 months. So I believe you should:

  1. Set a goal to get to cash-flow break even in 18 months (which would put us in control of own destiny well in advance of when we’d need the cash)
  2. Try to do that through revenue growth, not expense cutting. Keep pushing on the monetization path till you have real success or road blocks.
  3. Trimming fat, being cheap, and upgrading people where you can are all very important.
  4. Set the burn rate such that you have 24 months cash even if you don’t hit your revenue/margin targets
  5. Reassess as you go

Stay focused on the current path of monetizing and don’t chase other new revenue ideas yet unless they are incredibly low hanging fruit.

SEO is the #1 goal. All guns should be on that over next 90 days. If you can truly crack that nut, it puts you in a huge position of strength.

Remember that you have a winning idea, and it will make sense in the end. As you walk this tightrope, you can count on me as your safety net."

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