Money quote:

If you’re going to hit the wall, you should do so with three or four
months of capital left in the bank. You should cut down to your core
staff and tell them “we have 120 days of cash left and we’re going to
try to land the plane safely. If you want to leave at any point during
the 120 days you’ll get the reference of a lifetime from me. If you
help us land the plane safely I think we’ll all be better off because
of it.”

I wish I had this kind of advice back in 2001 when we had to layoff 20% of our workforce. In a day that really sucked, I personally took out 75% of the marketing department I headed. It took a toll that is still with me today but I’m sure all the people affected are doing fine these days. But back then all I had was Michael Wolff’s book, “Burn Rate,” which told the story of an early web entrepreneur’s crash in a scathing memoir. I clearly remember referencing the book when writing our S-1 and being told our CFO had just resigned, almost exactly like in the book. In hindsight, I wish I would have kept my mouth shut and just looked for another job; lessons learned, etc.

If you are leading a tech firm today and grappling with what to do, I’d suggest reading Jason’s thoughts. If you think they are extreme, you have the wrong job; in my experience they are right on the money, as painful as they are to implement. He also just sent a follow up email offering to help coach a start-up with less than 6 months runway; I’d take him up on the offer.

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A few weeks ago I signed up for the Jason Calacanis mailing list that replaced his blog a while back. Over the weekend I received my first email which Michael Arrington also posted over at TechCrunch but later took down, so Jason could post it on his own blog (a return?). This email really came at a good time for me as I have been mulling over future plans as I get ready for October.

Jason’s email lays out a scorched earth scenario for Web 2.0 leading off with:

“It’s my believe that the economic downturn will be much worse than it is today, and that 50-80% of the venture-backed startups currently operating will shut down or go on life-support (i.e. 3-4 folks working on them) within the next 18 months.”

As someone who got their butt kicked in the last tech bubble, this doesn’t sound good but I’m more optimistic today and I was seven years ago. What’s great about Web 2.0 is that a business can go on life support or just a few people can build something meaningful. What happened in the last dot-com bubble will not be totally repeated as online applications don’t require much money to develop or run. The open source frameworks available today make it possible for entrepreneurs to develop their business while they keep their day jobs. But those aren’t the “venture-backed startups” Jason writes about. It just means the nuclear winter for tech startups will be much shorter than they were the last time around.

What I found most useful in Jason’s email was not his doom and gloom predictions; you don’t need to be Nostradamus to see all manor of pain in the future. But his suggestions for how to cope and maybe even thrive in the tough times ahead really made me take stock. He boils it down to three areas: execution, the value of your idea and “outside factors.” The first two are pretty straightforward but in looking at my own business, execution could always be improved. And I’m including my blogging here and elsewhere in that area which has been sporadic at best. I think my fundamental idea is sound, bringing conversational marketing to the wine industry, but my bespoke approach is not the most efficient and doesn’t scale well. So I’m going to reengineer some parts of my service delivery to improve on my idea. The whole “outside factors” thing will make anyone crazy so I’m not going to concentrate on this one until getting the first two optimized.

So I’m preparing for the worst. And looking forward to what ideas Jason will drop on his email list next. Sign up here to get your own copy.