Timing has been on my mind. I was thinking about MongoMusic when we nearly ran out of money, but then we found an enthusiastic champion at Microsoft. I’d call this fortunate timing. I saw a highlight of Terrel Owens getting hit with a deep pass from Tony Romo in perfect stride. Coordinated timing. Buying a house in 2005. Unfortunate timing.
For entrepreneurs, there are three major pieces of timing.
First. When to raise money. The simple answer is when you can. But. Timing is key. Is capital available. Did three other startups just launch or raise. And. What’s going on in the macro-economic environment. Hit these right and it’s much easier to raise money. Mis-time this and you’ll most likely have to bootstrap (not a bad alternative, but changes how you grow the business).
Second. Timing the acceleration of spending. When you move from product development to marketing a product. The shift to spending on marketing should mean that the product is ready. I think a lot of early companies mis-time this part of the life cycle. They spend before they are ready. The best timing is to start the spending just before the product is ready. Then you want to be able to hit the gas as soon as you see the fit between the product and the market. Spend too early and the burn rate goes way up. The results are poor. And. The company will need to take a major step back.
Third. Exiting. Timing this is huge. We heard MSFT made a few offers to other music companies before they purchased MongoMusic. Those companies ultimately went on to much smaller exits and failures. If you are timing an exit. Sell before you stop growing. Growing companies get premiums. Sell before you run out of money. Companies without cash have no alternatives and the price will reflect it. Few people knew the access to capital was going to slow way down. Same goes for buying companies. If you wait too long to buy a good company, the price appreciates rapidly. At the same time. Taking a long term view during an economic downturn can be very opportunistic. I thought Yahoo picked up some real bargains during the last one. Purchasing 6.4 Million registered users for 12 million bucks.
With the financial crisis, online advertising growth slowing, and still a tight engineering talent market. I’m conscientious of timing. If I was raising money and had a term sheet. I’d be closing it quickly. If I had an online ad supported business, I’d be cutting waste. If I was hiring a bunch of engineers, I’d be careful with my cost structure.
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