Rude VC: The Resources vs. Agility Trap

Oct 2, 2012
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These are times of tremendous uncertainty for France’s startup ecosystem. Uncertainty of how the new administration of President Hollande will treat startups. Uncertainty over upcoming revisions in the tax code that will affect entrepreneurs and investors alike. Uncertainty in the French jobs market. Uncertainty hanging over the euro. Uncertainty over how exothermic macroeconomic events, such as the U.S. elections and rumors of tech bubbles, will affect a startup’s own revenue forecast.

Periods like this require prudence, of course.

However, prudence means different things to different groups. For large corporations, prudence means sticking to your knitting and ‘playing the ostrich’. Resist change and don’t stray from your core business. If anything, make small incremental improvements in processes or cost efficencies. Silence the mavericks, require consensus before acting, and by all means don’t do anything radical.

Startups that try to behave in the same manner of prudence as large corporations, on the other hand, may well be doomed. In a startup, ‘playing the ostrich’ is playing to your weakness. Startups don’t possess the luxury of abundant resources like large firms do. Keep your head down for too long, and you may end up jolted to the realization that you cannot meet payroll and the end of the month.

Entrepreneurs: in periods like this, rather than succumbing to your weakness, play to your strength: agility.

Agility is your greatest defense during periods of great uncertainty. Agility is the reason that incumbents become disrupted by innovators. Heck, it’s probably the very reason that your employees left their stable, boring CAC40 jobs and joined your hair-brained adventure.

Agility in times of doubt means being aware of the shifting market environment and pivoting swiftly — and often — if necessary. It means stripping away all those planned features from your product beta and launching one that is viable in its truly bare minimum form. Ruthlessly prioritize your market segments; don’t try to be everything, everywhere. It means ship now and apologize later.

Overall, it means being decisive. Don’t wait to make those gut-wrenching decisions to cut your burn rate and give yourself a safety margin. You’re by nature commendably optimistic. But that not-yet-signed VC term sheet on the table, or that imminent bank facility that is pending a “mere formality”, or that verbal order confirmation from a big prospect whose signed contract will come “any day now”, etc. just might not materialize before it’s too late. Over-compensate now, and if necessary, you can always course-correct later.