Advertisements

Venture Capital Jobs Blog

Curated by John Gannon and Team

What recession? Our company is recession-proof!

leave a comment »

If you ask someone if they are ‘above average’, ‘below average’, or ‘average’ in a particular area of their life (athletic ability, intellectual capability, physical attractiveness, etc) most often you will hear from that person that they’re at least average, and probably above average. After all, most (?) people tend to think well of themselves.

So where have all the below average people gone? They’re certainly not raising their hand to be counted as below average…

Let’s take that analogy and apply it to the VC pitch process.  In some of the pitches I’ve heard over the last few months, the company will address the current market conditions and financial crisis by saying that the impending recession is actually a boon to their business.  I’m not sure if these companies are just highly optimistic (a good trait for an entrepreneur to have, no doubt), or are just telling me what I want to hear.

In effect, these companies are saying that they will be ‘above average’ performers in this environment.

True, I am naturally going to be wary of investments in sectors that I think will be hit in this downturn, but frankly, it goes without saying most sectors will be adversely affected by the downturn.  A large percentage of companies will see a negative impact due to the downturn, and there will be a small percentage that will benefit.

During a pitch I’d rather hear something to the effect of “This recession will create a challenging environment for my business, and here’s how our company will deal with it” versus “The recession is really good for us, and here’s why.”  The former builds credibility while the latter makes me less comfortable with the company and the management, unless you have a really solid, provable case about why the market conditions play into your company’s favor.

It’s true, I always want to invest in an ‘above average’ business (OK, hopefully an outstanding business), but I’m also cognizant of the fact that in this environment there will be a very small number of startups that fit in that ‘above average’ bucket.

Reblog this post [with Zemanta]
Advertisements

Written by John Gannon

November 12, 2008 at 4:04 pm

Posted in Uncategorized

Leave a Reply

%d bloggers like this: