Train Thoughts

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.

In 2000, when lots of small companies died, some said the wheat was separated from the chaff, or only the strong survive.  The sense was that weak companies with no business model shouldn’t make it. Billions of venture capital was lost.  And.  Small investors, accounting for billions and billions of public technology companies.  Gone.  All gone.

There has been a historical collapse of some of the world’s best known financial service companies.  Companies like Lehman Brothers, Merill Lynch, and maybe IAG, and Washington Mutual.  Big companies, with long track records are vanishing.  Bank of America seems to be cherry picking with the blood running in the street - that’s what some of the smart technology companies did in 2000.

When the the fed bailouts stop, and billions and billions of market capitalization are wiped out, what will they say.  Companies shouldn’t have made risky investments by giving money to unqualified loan applicants?  I don’t know.  It’s hard to make sense of what’s happening and how it will stretch out of finance to other sectors.

The Republicans and Democrats are masters at strategy, but only one can win.  Since we have seen Obama and McCain for some time, I think it’s particularly interesting to see how their Vice Presidential selectiona are affecting the race.

Obama chooses Biden to appeal to working class Americans and adds experience to the ticket.  McCain goes pretty far to the right with Palin and the hope of igniting the Republican base.  While the Gallup Poll says that bounces rarely hold, this most resent poll shows McCain with his largest lead.

Last night at dinner, I asked my guests, “Would you be more disappointed if McCain beat Obama than you were when Bush beat Gore and Kerry?”.   Everyone agreed.  The Bush victory in 2004 would remain the most disappointing.  Because.  We elected Bush a second time.  But.  There is good news.  It’s most likely going to get better no matter who wins in 2008.

I posted a poll on this question at HubPages.  Vote.