"This Is A Crucible Moment" – Sequoia's Ominous Warning To Companies On How To "Avoid The Death Spiral"
"This is not a time to panic. It is a time to pause and reassess," begins the thought-provoking presentation from veteran venture capital firm Sequoia Capital.
But that's about as 'positive' as they get as the founders of the firm warn of a prolonged market downturn and urges the startups in its portfolio to preserve cash and brace for worse to come.
"We believe this is a Crucible Moment, one that will present challenges and opportunities for many of you. First and foremost, we must recognize the changing environment and shift our mindset to respond with intention rather than regret."
And in its somewhat ubiquitous historically grim outlooks (its "R.I.P Good Times" in 2008 and "Black Swan" memo in March 2020 have become legendary) don't expect a quick rescue and recovery this time.
"Sustained inflation, and geopolitical conflicts further limit the ability for a quick-fix policy solution. As such, we do not believe that this is going to be another steep correction followed by an equally swift V-shaped recovery, like we saw at the outset of the pandemic," the note said.
They argue that it will be "Survival of the Quickest"…
In particular, Sequoia urged companies to look at cutting projects, R&D, marketing, and other expenses, noting that companies should be ready to cut in the next 30 days.
"We expect the market downturn to impact consumer behaviour, labour markets, supply chains and more. It will be a longer recovery and while we can't predict how long, we can advise you on ways to prepare and get through to the other side," it said.
The founders/CEOs who face reality, adapt fast, have discipline rather than regret will not just survive, but win, noting that "It is easier to preserve cash when you have more than six months left. Recruiting is about to get easier. All the FANG have hiring freezes."
They conclude their presenttation by noting that:
"At Sequoia, we believe that the one who wins is the one most prepared."
In other words America, brace for capex cuts, hiring freezes to accelerate, and growth to evaporate.
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Read the full presentation below: