Party like it’s 1999, and then cut costs like it’s 1929

Tech blogs are full of posts about layoffs at startups and tech companies. On the face of it, there isn’t anything surprising about these, given the times that we find ourselves in now. These news items are eerily reminiscent  of stories from the 2001-2004 time frame, when counting layoffs was every tech journalist’s most significant activity.

However, I am surprised and appalled at how we as a society fail to learn lessons from downturns, especially given how close on the heals of the previous one this recession has arrived. I have interacted with several VC-funded startups in SF, Philadelphia, India and elsewhere over the past year, and I was continually amazed at how these startups (especially the ones in bay area) were spending VC money by boatloads. Many of the startups in the list cited above literally doubled or tripled their headcounts in the last 6 months. Premium beverages and food were free flowing even where revenues were non existent or growing rather slowly. 

In all due respect, I believe that VCs and managers at some of these startups could have done a much better job of scaling costs linearly, rather than exponentially, even during ‘good’ times. No one could have predicted the extent of the current downturn, but I am a firm believer that startups need to be lean and fighting fit at all times.