Editor’s note: This is the latest in Local Tech Wire’s continuing series of interviews with leading tech executives about how companies can best survive the “nuclear winter” of 2009.
ATLANTA — Michael Elliott, general partner at Noro-Moseley Partners, sees some silver in the lining of a dark economic outlook for 2009. He warns, however, that entrepreneurs and tech company executives have to be conservative in spending and hiring because 2009 doesn’t look to be what he calls a “breakout” year.
Local Tech Wire’s Q&A with Elliott:
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? None of these? Please explain.
Conserve and – in most cases – cut, especially if you’ve staffed up for growth. 2009 is unlikely to be a breakout year – especially not so during the first six months.
Who will be not just the survivors, but the winners still standing when the recession ends sometime in 2009?
It will be those companies that have established the closest and most constant contact with customers, whether though SaaS (software as a service) models, cloud computing or open-source servicing solutions.
What is your biggest fear/concern entering the New Year?
Our biggest concern is the lack of a healthy market for strategic partnering – and ultimately – strategic exits.
Conversely, what are you most optimistic about?
Some of our best investments have been made in times of a down economy. Venture capital is a long-term business, and investing in fundamental growth is great long-term strategy, especially as values are depressed and weaker competitors exit markets.
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.
Growth opportunities in 2009 will be around companies that offer a service or software that saves money quickly. Expense-reduction plays in health care will continue to be strong. On the IT side, companies that offer something compelling in video and live video – whether it be search, distribution optimization or convergence (delivery to the TV or the iPhone) – will continue to grow due to the continued uptake in video consumption on the Internet and handheld devices.
These times serve as a reminder that the best investments are in companies that solve real problems for people and businesses. As a result, we also like SaaS companies that reduce customer acquisition costs, increase sales effectiveness and assist in more efficiently controlling costs. These are issues that persist, and there will always be a market for solutions that address them.
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?
We believe these capital-intensive technology companies are simply going to be very tough for entrepreneurs to manage. Certain high-growth sectors – specialty medical devices, for instance – will be able to attract strategic capital, but in general, these areas will be tough ventures until liquidity returns to the capital markets.
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?
Growth-company executives are excellent at planning for and managing growth. Some of the toughest decisions will relate to slowing infrastructure building (cost-cutting) in the face of low or no growth. The tough decisions that must be made today in order to survive the downturn will be critical in determining the ultimate value of the enterprise at the time of exit.
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?
Yes, but as always, great teams will find funding. We have asked our CEOs to conserve cash, consider delaying investments and, where possible, raise more capital than planned.
Do you believe off-shoring of jobs will increase this year? Please explain.
Outsourcing is here to stay, but it is not the top priority for discussion as it was a few years ago. In our sectors, the highest value will be generated by entrepreneurs focusing closely on customer needs, ultimately delivering low costs by a combination of eliminating unnecessary products/features, outsourcing low-value-add processes and integrating efficient technology into customer solution sets.
What advice would you offer to job seekers in such a tough environment?
Cast a wide network, but be very specific in differentiating yourself. Many executives are out in the market exploring options, and it will be the specific experiences woven into your personal pitch that will differentiate you and keep you top-of-mind for opportunities.
