1/ How to survive a depression:
If demand for your business suddenly drops 30%, 50%, 80% overnight, what do you do?
Cut costs by a commensurate amount to stay solvent.
This is very sad and tough to do but the answer is clear.
If demand for your business suddenly drops 30%, 50%, 80% overnight, what do you do?
Cut costs by a commensurate amount to stay solvent.
This is very sad and tough to do but the answer is clear.
2/ Who can’t cut the requisite amount? Those with big fixed obligations. Eg:
— debt service (highly levered businesses)
— fixed payrolls (union contracts; govt workers; tenured staff)
— big leases (real estate, planes, capital equipment)
Expect those entities to need bailouts.
— debt service (highly levered businesses)
— fixed payrolls (union contracts; govt workers; tenured staff)
— big leases (real estate, planes, capital equipment)
Expect those entities to need bailouts.
3/ Startups should do OK because they don’t have big fixed obligations. They can cut if they have to. Assuming they have the state of mind to do that and haven’t saddled themselves with fancy offices, venture debt, etc.
4/ Startups that won’t survive will have features of BigCos:
— debt overhang
— overly large payrolls
— big office leases
— expensive biz dev deals
— slowness to react
— unwillingness to cut sacred cows
— debt overhang
— overly large payrolls
— big office leases
— expensive biz dev deals
— slowness to react
— unwillingness to cut sacred cows
5/ Yes, Brian can save Airbnb and you can save your startup. You were a seed or series A-C company at one point; you can go back to an earlier stage and operate that way again. The rebuild will be painful but you can survive.
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