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Surviving nuclear winter – a view from both sides: Veteran investor says invest and spend wisely

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Editor's note: This is the latest in a series of Q&A's with leading technology executives in the Carolinas and Georgia about how tech startups and investors can survive – and flourish – in 2009.

RESEARCH TRIANGLE PARK, N.C. — Bill Warner has been on both sides of the hill in the battles between investors and entrepreneurs – as an investor and advisor as well as an entrepreneur.

Given his background, the head of Paladin and Associates, a consulting firm in the Triangle and also a driving force behind the Triangle Accredited Capital Forum, an angel investor network with over 100 members throughout the Southeast, speaks with authority when talking about the “Nuclear Winter” of 2009.

This year will be a good one in which to start a business, he says, but do so carefully – and spend what cash you have wisely.

LTW’s Q&A with Warner, who also is a regular contributor to LTW as author of the “Angel Connection” column:

A “nuclear winter” appears to have descended upon us as a New Year begins. But in the last such "winter,” the Internet and Web 2.0 emerged as entrepreneurs seized upon tough times to deliver innovation and to grow their businesses or start new ones, not just survive. What is your advice to fellow and would-be entrepreneurs entering the New Year – Conserve, cut or invest?

Invest. There are some great deals to be had, and it’s a great time to start a company, but conserve cash in so doing.

Who will be not just the survivors but the winners still standing when the recession ends sometime in 2009?

Those that spent wisely in recession-proof businesses.

What is your biggest fear/concern entering the New Year?

Further government intervention in business and increased taxes on businesses. The “Obama Bomb.”

Conversely, what are you most optimistic about?

There will be some great deals emerging for investors as valuations of companies plummet and they need cash to survive. The winners will be those who choose the ones that will survive.

In what areas do you see opportunities for growth in 2009 – Means to help companies become more efficient? Enabling technology to help people do more with mobile devices? Investments in clean technology? Further evolution of the Web? Tell us what you think.

Investments in biotech and green/clean technologies.

If the IPO markets remained closed, how can life-science, medical device and other capital-intensive startups best generate cash to keep investors onboard and the company doors open while pursing R&D?

IPOs have been nearly non-existent for a few years now at less than 1 percent of all venture-backed companies. So, it can’t get much less. They way you provide exits is through licensing deals, dividends, mergers and acquisitions.

What do you believe will be executives’ biggest challenges this year – Financing? Growing sales? Balancing the cutting of costs with need for R&D as well as consumer support?

Financing will be hard to come by, so growing sales through current products and services, while cutting unnecessary costs and expenses.

Will venture financing tighten, especially for startups, as recent surveys have indicated? If so, how do you (or) your clients (or) your portfolio companies adapt?

First-time venture investments in any kind of company will essentially dry up, but will still be available to their current portfolio companies. Angels will still invest, but much more selectively. The entrepreneur's recourse is friends, family, business associates and strategic partnerships.

Do you believe off-shoring of jobs will increase this year? Please explain.

If Obama raises taxes on businesses, making U.S. companies even more uncompetitive, then more jobs will go offshore. We’ll know in a couple of months. Also, more government control and regulation of businesses will do it as well, and that is on the Democrats' agenda.

What advice would you offer to job-seekers in such a tough environment?

If you have a job, keep it. If you need to change jobs, don’t without really being sure it is a better deal in the long run. If you are out of work and looking for a job, good luck. It’s very hard to find one without a skill that is in high demand.

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