On Wednesday night Silicon Flatirons hosted a panel on “Growing a Startup Amid Uncertain Economic Times.” The event, moderated by Associate Clinical Professor Brad Bernthal, included the following participants:
- Neil Robertson, an entrepreneur who is currently CEO of Palio. Robertson boasts a track record of having raised over $50 million from VCs in the past fifteen years.
- Jason Mendelson, Managing Director of the Foundry Group
- Kendall Fugate, Founder and SVP of Square 1 Bank Mountain Northwest region
- Jim Cowgill, a Principal in the Audit Service area of EKS&H
The panel wasted no time in addressing the titular theme of the evening, and the participants were largely in agreement that the current downturn offers entrepreneurs unique benefits relative to a rapidly growing economy. Mendelson succinctly noted these times offer “cheap equipment, cheap rent, and cheap talent.” Robertson indicated that compared to the inherent challenges in launching a company, the trajectory of the economy is “completely de minimis related to all the other problems you’ll face.” The panel did note, however, that businesses which have matured past the startup stage but still fall short of profitability could face a strong headwind in maintaining customer accounts and obtaining second round financing.
On the question of liquidity in the venture capital industry, Mendelson admitted he’d heard rumors of skittish limited partners (those individuals and institutions that supply the cash to the VCs), but a casual investigation couldn’t find a single established firm experiencing capital call issues. While he believes that it will likely be more difficult for VCs to raise new funds over the next twelve months given built-in investment restrictions at many pensions and universities, he was unwavering in his central platform: “An A+ business will always get funded.”
On the question of how the current economy echoes the technology bubble of 2001 the panel dismissed the comparison, noting that seven years ago the business fundamentals of Internet companies were responsible for the industry’s undoing while today the cause is exogenous to practices within the space. Mendelson believes that “entrepreneurs learned lessons” in 2001 and there isn’t the need for a lot of change today as most companies are already running cost consciously. Fugate noted that it’s typical for companies in a downturn to freeze hiring or initiate layoffs in an effort to cut the monthly burn rate, and Cowgill offered that doing so can oftentimes offer financial dexterity to a firm, creating opportunities and increasing the likelihood for continued venture funding.
In closing the evening Bernthal asked for general strategic advice in consideration of the downturn. Robertson pleaded with the seventy assembled entrepreneurs to talk to as many people as possible, noting that Boulder is remarkable for the accessibility of successful technology pioneers. On the related idea of operating in “stealth mode,” he offered a dose of reality: “No one is going to overhear your business plan at Starbucks, stop what they’re doing, and go start a company.” Mendelson capped the evening by channeling The Hitchhiker’s Guide to the Galxay: “Don’t Panic.”
Silicon Flatirons, in administering the CU New Venture Challenge (CUNVC), will be hosting a number of programs, crash courses and workshops leading up the final challenge to be held the week of April 13 to 17. Teams must submit intent to compete by March 20th. To qualify, a team must have at least one team member with a CU ID. Upcoming events include an Entrepreneurs Unplugged Session with ViaWest CEO Roy Dimoff on November 19 at 6:00 pm in the Engineering Center Room ECCR 265 and a crash course on IP Protection on December 3 at 5:00 pm in Room 204 of the Wolf Law Building. Please visit cunvc.org for more information.
