There has been a lot of very sagacious advice
offered by Venture Capitalists and investors to their portfolio
companies in the last week. I’ve read them all 3x. Dogster, Inc. is not
VC-funded, and we have a negative burn rate (aka are profitable) by, I
would credit, putting as much focus on multiple revenue streams as we
had on growing a great service. We’ve always been a very risk adverse
company, which I suspect in the next year will be reclassified as a
quite sensible company.

Photo by Laughing Squid

But for all the doom and gloom of the VC’s desperate to not
keep their flock from getting culled like they did six years ago, the
next couple of years will not be like 2002 and 2003. They may
be for the VC firms that struggle to manage their overfunding and
overvaluating tendencies of the last couple of years, but their
retrenching into bunkers to save their fund’s value will not have
nearly the affect on entrepreneurs and angels as it did earlier in the
decade.

It’s no secret that Internet businesses can be started with no
budgets and get themselves to profitability within a year or two. We
did it during the ‘nuclear winter’ and so did Blogger, Flickr,
Delicious, LiveJournal, HotorNot, Moveable Type, WordPress,
StumbleUpon, … need I go on? But more importantly, it’s happening right
now. Dozens of similarly potent companies have launched in the last
year. You’ve seen the iPhone App store right? The cash model is back and the landscape for digital products is an order of magnitude larger than in 2001.
Then it was web and games. Now it’s web, games, phones, social apps,
Tivo/DVR appliances, in-car appliances, hand-held games. For dog’s sake
walkmen, phones, and VCRs (aka DVRs) are now Internet appliances.
What’s next? Who’s going to make it? I don’t know but in two years
we’ll all know.

And, as serial entrepreneur Shervin Pishevar so eloquently reminded us in his great entrepreneurial missive, the Horatio Alger spirit is no longer the American Way, it’s the Global Way.
It’s not just the minds pouring out of American universities and
offices, it’s the minds of the WHOLE world. Creativity is brimming in
what we used to deride as Eastern Block countries. And we already know
Europe, India, China, Russia, etc. have all reformed their economies to
support, foster and expand environmentalism. Even if young Americans
put their heads in the sand, there will be as many new Technology products released in the next two years than in the last six.

Dave McClureThen
their are the angel investors who are very different than their fin de
cielce cousins. Angels in 1999 were Dentist and Alumni Groups, Waste
Management companies, mothers and fathers. There were very few
‘made-my-millions’ technologists helping the next generation as there
are now. The current generation of angels and early investors,
many of whom I’ve gotten to work with and know don’t do it by choice,
they do it because they love it. They love the excitement, the
discovery, the opportunity, the chase. They love working with
entrepreneurs and helping develop their products. I can
promise you some that quickly come to mind, Ester Dyson, Joi Ito, Josh
Kopelman, Jeff Clavier, Brad Feld, Aydin Senkut, Reid Hoffman are not
going to go to Switzerland or Kona to ride out the banking freeze. They
would go crazy. Heck, they’ve probably moved more money into cash than
they’d like and are seeking more places to put it. Even if some of the
angels with funds saw those funds freeze up, I can promise you they
would start investing as individuals again because they can’t not pass
up on good opportunities. They know better. Wall Street and Sand Hill Road’s loss is their gain.

The next line of whining and fear the VCs are repeating is “but
there will be no exits … M&A is closed and IPOs are overâ€. To that
I say IPOs died in 2001 and the M&A market has been tepid at best
for the last two years. I was talking with First Round Capital’s Rob
Hayes the other night, who said “does anyone seriously think tech had a
bubble problem anymore?†And then added more realism by saying †We’ve
gone the last 3 years with a slow exit markets, so it’s not like it
will be any different next year.â€

If there was ever time I would think the advice I and my partners
have made for growing a sustainable value business would not land on
deaf ears it’s now. To all entrepreneurs, now is a GREAT time
to make something. Trust me new entrepreneurs, you’re better off making
it on your own than risking it to VC growth requirements. Develop a
great product and great people will find you to help. Expand that great
product and companies will still want to partner with and buy you.

In the last month we’ve closed $250k in new deals and have received
proposal requests from every major pet-related CPG company. (Mars,
Purina, P&G, Clorox, etc.) It’s the banks and equity folks running
for cover. People are buying iPhone Apps like they are the candy that
they are. People will be playing games, and using the Internet more
than ever. Home entertainment devices will penetrate the majority of
American homes by the end of the decade. Wii’s will open up like the
iPhone App store and everyone’s phone will have a web browser.

So heed all that VC advice: find revenue, watch costs, don’t expect easy outs; but now
is definitely the right time to be making the next great thing. Just do
in a way that it makes money from the get go, and you’ll guarantee your
success no matter what happens.

Dave McClure has a great post about how to avoid the woes of others and stay focused on making great things. He’s right.

[Photo 1 by Laughing Squid
of Stewart Butterfield (Flickr) Biz Stone (Xanga, Blogger, Twitter) and
Joshua Schacter (Delicious) on a panel I led about Founders. Photo 2 by
Dave McClure of Rob Hayes and Jeff Clavier on a panel I added entrepreneurial color too.]

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