@tlas Insights

…I’m Glad that’s Over

The theme for our last summer Fajanza® was “Here’s to 2010”.  Well, here we are at the eve of the new year and that sentiment is felt by many.  While the year was marked by geopolitical issues from Somalia and Zimbabwe to Iraq and Iran, everyone in the US seemed to focus on the economy as it (hopefully) found its nadir and then steadily recovered.  Looking at the recession to date, it looks like we felt a dip and largely recovered.

But the real impact is more easily seen if we look at a ten-year period. With this view we see why we’ll be telling our grandchildren about 2009.

For those of us working with start-ups, the economy didn’t just make world affairs less important but made it hard to notice anything beyond concerns like making the next payroll.  I don’t know what kind of data we’ll eventually see but it was a rough year for start-ups.  Venture funding of new companies nearly collapsed as VCs decided which of their investments were worth keeping and which should die.  The former required more insider financial support as they were unable to sell, go public, or even take down funding from new investors at a reasonable value.  The latter died.  Angel investors faced much of the same situation although they don’t have investment committees that judge winners and losers.  Angels are typically more loyal and optimistic and most sought to continue support of their entire portfolio if it seemed there was reasonable hope for success or achievement of the next milestone.

We saw three venture investments in 2009: Microgreen (Waste Management and WRF); Inlustra (Samsung); and Gist (Foundry).  Three gems, frankly, in the pile of coal from which Santa picks for stocking stuffers for VCs who CEOs would judge a little too naughty for anything this year.

For employees, it was a time many of us have never experienced.  Nearly everyone had a friend or relative out of work.  Some, heavily invested in real estate and stretched with large mortgages, faced fiscal calamity.

Early-stage companies felt the end of growth more than lay-offs.  For companies with 5-10 employees, there wasn’t much room to cut and we only saw job cuts at two of our 40+ active companies.  But the growth ended.  Few start ups grew in 2009.

We can talk about investors and we can feel the impact as employees but what about those who really drive the economy?  No, I’m not talking about Madoff or Bernake, I’m talking about the start-up economy so I mean the entrepreneurs.

I’m reminded of my favorite Christmas story.  It was on December 23^rd, in 1944.  A US armored division was retreating from the Germans in the Ardennes forest when a sergeant in a tank destroyer spotted an American digging a foxhole. The GI, PFC Martin, of the 325th Glider Infantry Regiment (my old unit), looked up and asked, “Are you looking for a safe place?” “Yeah” answered the tanker. “Well, buddy,” he drawled, “just pull your vehicle behind me…I’m the 82nd Airborne, and this is as far as the bastards are going.”

Look again at the charts above.  It was in this economy that Marketfish launched, that Meteor transformed its business model with a successful new offering, that Liquid Planner showed breakthrough growth.  In the summer of 2009, Limeade was offering its wellness solution to customers as it started to grow sales and Zooppa successfully launched in a new country.  I could go on.

The boldness, the confidence, to use a popular term - the audacity of these entrepreneurs to start something new and to persevere in the worst economic climate most of us have ever known is beyond inspiring.  Technology entrepreneurs are the foundation for economic growth in this country and they defy the odds with each venture.  They set an example for all to follow in 2009 as they grew revenues (every company in our portfolio that had revenues in early 2009 ended at a higher rate) and payroll (overall, our portfolio showed payroll growth of about 10% for the year).

The entrepreneurs certainly were aware of the economic climate.  But instead of retreating, they dug in, worked harder and applied themselves to win.  I couldn’t be more proud of our CEOs and what they’ve accomplished.

The recession has brought out the worst and the best in us.  We’ve felt the sting of failed commitments, been saddened by selfishness, and been frustrated by short-sightedness.  Relations, both business and personal have been strained.  But it has also been a time of courage, of loyalty and of faith.  I’ve never felt so immersed in the camaraderie of entrepreneurship and, as unpleasant as it’s been, many of us will come out of this refreshed and better for the experience.  You’re a special breed and you don’t hear nearly enough appreciation for what you do.

Here’s to 2010.  It will be better and many of you who stood up to the overwhelming economic dangers will be proven to be heroes in your own way.  I’m proud to be associated with you.