trendpreneur

A mixed bag from the afternoon’s sessions, most of which can be summed up in one tweet or less. Currently in a ’state of funding’ panel with a couple of strong, if well-trodden, themes — yes, people are still getting funded, and if you can run on your own cash through 2009 you’ll be fine — having a great idea is key, and plenty of startups have great ideas now — and revenue is key. You won’t get funded with no sign of revenue and funding yourself through sales is a solid plan in the current climate.

Quite an interesting contrast between US/European points of view – some speakers are American, others European. European attitudes are perhaps more helpful now, pointing towards incubators, government initiatives vs American “VC is everything” outlook, the very thing that’s failing in the downturn.

Couple of other points from the afternoon – Morten Lund was very candid about losing everything (about to lose his house) in an investment gone wrong, and then Martin Vasavsky also mentions being bankrupt for a month in 1998. Seems like finally some realism’s entering the fray rather than the happy “see no evil” approach. I’m not sure whether they can give any more advice than “have a solid idea and make money early” – but it would be interesting to see a focus on angels as well as VCs.

Susan Wu gave a really interesting talk about virtual goods (with a slightly… weird WoW example, but then I’m too nerdy by half about that game). Consumer focused products, especially those with social components, can make money from virtual goods — think about the verbs people use to interact with each other and your product and monetise them! Gifting is primary example – but there’s also stuff like getting a ‘premium’ name, and of course the (tired but still true) example of avatar customisation. Biggest Chinese internet platform makes 70% of revenue through virtual goods (basically an IM service). Quite cool to think about this from a web point of view rather than a gaming one.

There was also a panel on branding and a couple of the main things coming from that were – brands make mistakes and by trying to build a one-to-one conversation with customers but using the wrong platform, a lot of money can be lost (and even reputation/image). However when they work they’re great. But brands, especially middle management, need analytics and to see where the money is – something that helps a brand figure out how much money they’re making by having a presence on your service is great – ROI is key. Pretty interesting given one of the things I’m trying to do with my software…

One of today’s spreading stories is sending out mixed messages. VentureBeat reports on Sequoia Capital, whose leaked presentation carries the starkly grim message “R.I.P. Good Times”. The message to startups is simple, but reflects some of the desperation various companies must be feeling by now: “Get Real or Go Home”. However, there’s some more concrete advice in the presentation.

Instead of reaching out and throwing money at a market share, preserving capital is the way to go; streamline operations and stay cash-flow positive, ensuring your product is a must-have, the revenue model is sound, your customers can pay and you know your place amongst your competitors. There will be fewer acquisitions, prices will go down, so don’t bank on being bought out by a big guy as your only viable exit strategy. Spend every dollar as if it were your last.

On the other hand, BusinessWeek’s TechBeat is resoundingly chirpy over the fate of early-stage startups. Early stages aren’t worrying about revenue and being cashflow positive, though those with grand designs of $10m first-round funding and being bought out within a year will probably have to rethink their plans. Investment will be hard to come by for the near future, but that affects early stages less than those already grimacing at their bottom line. No, seed-stage businesses are in a great place now, as they can adapt far more readily to the changes in the market than an entrenched company.

TechCrunch nails it: “So what exactly just ended? Easy capital to start.” If your prospects are solid, there’s still going to be money out there. But if you’re flying high on an idea that won’t ever recoup the sort of revenue you need, the reality checks of the current economy will bring you down to earth before money gets wasted. It’s all too reminiscent of a few years ago, but many businesses survived that intact and even stronger than before. Consumers and businesses are tightening their belts, but there’s still basic demand for a lot of things.

Plus, there’s always an opportunity in the darkest of times; how many businesses will spring up offering financial advice, discount products, coupon roundups or any of a hundred-and-one ways humans profit from others’ panic and loss? Far too many.

[Update: Great post on the downturn and startups by 500 Hats, via Tim O'Reilly.]