Don't Panic!

Gabe Rivera used to say that Weekends on Techmeme were the time when "bitchmemes" came to the top - and this weekend its been Panic Bitchmemes galore, mainly aimed at those who dared suggest that the VC's penduluming from spend to save in 24 hours were a bit guilty of gate-bolting:

On TechCrunch:

The VCs are telling their portfolio companies to get ahead of the curve and conserve cash right now, and companies are starting to take their advice.

The criticism is coming from people who don’t understand that the world has changed in the last week and that companies need to change with it. And so they’re asking why VCs waited until now to tell everyone to conserve cash. Others are saying the boom is the VCs fault, and for them to lecture companies on conserving cash is ironic.

Actually, its the people who do understand very clearly that the world was changing who are asking the VC's what took them so long. But to be fair to Techcrunch, there's not a lot of scope for them to act differently. As TC notes:

They have one job: generate the best return they legally can from their investors’ money. In boom times deals get competitive and VCs make independent decisions on what deals to bid for....... Let me put it this way - if VCs ignored the economy and always invested super conservatively so that no one could accuse them of being irresponsible, they’d go out of business after their first fund failed to return capital to investors.

In other words, if they had behaved responsibly they would have been killed in the stampede from behind. Besides, even if you know What, its hard to predict When:

.....to argue that a company should always cut costs to the bare minimum is the same thing as asking that bear to act like it’s Winter in the Spring, just because someday Winter is definitely going to happen. All you end up with is a dead bear.

A bear market, mayhap? Onwards to Fred Wilson:

I've detected a bit of irritation, and even cynicism about the motives of Sequoia, Benchmark, Ron Conway, and others (including me perhaps) in the venture capital business who have been publicly and privately advising their portfolio companies and entrepreneurs everywhere to be cautious in light of the market meltdown and the potential for a long recession.

Interestingly, not all VC's think the above sentiments are on the side of the Angels - The very seasoned Alan Patricof:

Without challenging the comments, which expressed a heightened degree of doom and gloom for the economic prospects of young start-up companies particularly, I do think it calls for a somewhat more restrained response on the outlook and required action before throwing the baby out with the bath water.

Tsk. As Fred notes, this is a public service, not at all:

...some coordinated cynical attempt by VCs to talk down valuations or put entrepreneurs on the defensive.

Doesn't hurt though, as Mr Calacanis noted at FOWA last week - doing well by doing good

As I noted earlier, my take on this all is:

- The Internet isn't going away, its a global "once every 70 years or so" transformative trend

- Markets overcorrect - this panic is overdone, just as the hype was before it

- Reacting sooner rather than later is best.

- Bad times are good for starting new companies

That said, I think this was predictable awhile ago, and now is a bit late for VC's to be telling their charges its sh*t or bust, starting tomorrow. But they did exactly the same in 2000 so its not surprising. I'm with Louis Gray here:

It has only taken a few months of bad news on Wall Street to see some of the most visible proponents of Web 2.0 startups start to pick on them and demand significant changes. But the calls for a route to revenue and product quality should have been there when times were good, not just now.

Instead we got a whole heap of daft business models from dafter sounding companies, many of which got funded.....

'Nuff said for today.