Here is the balance of the survey responses from the VC-backed CEO survey we administered at the end of December 2008 into the first week of January 2009, both responses and a bit of interpretation.
Venture Capital Staff Reductions
Given survey responses, it appears the bell curve peak is in the 20-40% reduction in headcount. The group of CEOs who indicated these reductions were approximately half of the 60 CEO respondents.
- 40% or more staff reductions? ~ 10% of total CEOs surveyed
- Less than 20% staff reductions? ~ About 17% of all CEO respondents
Venture Capital funding
Winner on this question was "more than 9 months," with more than 40% of the CEOs. Runners-up were the "0-to-6 months of cash" CEOs, evenly split with 25% saying 3 to 6 months, and another 25% saying "less than 3 months." What this may indicate is that there is a bimodal distribution of funding in the market --those who are well-funded, with 9 months or more, and those companies who are running out of cash (popular definition = less than 6 months of cash remaining). This is reinforced by the fact that very few companies responded that they had 7-9 months of cash (less than 10% of companies). Therefore, one might imagine that those companies who are shortest on cash are also those who are making the deepest cuts in staffing. In addition, that there may be another round of cuts in store for those low-cash companies if they can't get another round closed soon.
Venture Capital Growth
Top implied answer here? Don't raise a venture round in 2009. And this is what the largest slug of CEOs responded with (33%). Of those who are going to try to raise in 2009
- one-third of CEOs see a flat round
- 16% feel they'll get an up round
- almost half (45%) are predicting a down round
Winner for this question shows some great optimism however, with about 1/3 each of the CEOs responding answering with either "revenues up 1 to 25%" or "Up more than 50%."
There was an intentional effort to get a fairly even distribution of venture-backed CEO respondents for this survey, to try to avoid sector bias. We were fortunate to have at least 10% (6 or more companies) from each of life sciences / biotech, medical devices, and the cleantech sectors. Software/Internet/telecom was the largest category represented, with 42% of CEOs hailing from this sector.
Improving the System
Q: If YOU could survey your peer CEOs, what question(s) are both urgent AND important to running your business you'd like us to consider asking in future polls?
This was one of the most rewarding questions for which to see the responses. Fully half of the CEOs polled had a question they'd like to pose to their peers, and some CEOs had several. Below is a partial list of questions we'll choose from in follow-on surveys. If any of those CEOs would like to respond individually to any of the questions below, feel free to post a comment on this blog entry and we'll post it for public consumption (clustered by general question subcategory as well as by industry sector). Of course, the winning question asked by one of you CEOs, just to validate that venture capital-backed CEOs are-if anything-self-aware, pragmatic, and not fatally over-optimistic: "What will CEOs do if their company fails?!"
1. Cost-related questions
- Approaches or success stories in restructuring debt to the company's advantage.
- Is it better to reduce headcount 20%, go to a 4-day work week, or reduce salaries by 20%?
- In addition to headcount reductions (if any), what type of expenses are you reducing? Are you delaying new projects/initiatives? How have investors reacted to this?
- Will you consider outsourcing some of your product development to make cost variable, at the expense of some know-how then being outside the company?
2. Sales/Marketing/Revenue-related questions
- How are you using the economic downturn to improve your business position/model?
- What are you going to spend more money on in 2009 than in 2008?
- What changes in the sales cycle are you seeing in the last 6months, 2 months, currently? What does the resultant trend point to for 2009 and what actions are you taking in response?
- How has your visibility into the level of future business changed in the last 3-6 months?Asked another way - what level of confidence do you have in your current forecast of business?
- What emphasis do you place on marketing in your organization? What do you consider the top 3 most important elements of marketing to be?
- How will you as CEO deal with longer term rate issues if you are a service business as it seems all labor rates are being pushed down?
- The number one reason why clients buy your product is? (cost, quality, service, other?)
3. Funding/exit/valuation questions
- Are you finding lending lines out there?
- If an acquirer made an offer to buy your company today, but at a multiple less than what it would be in a strong economy, would you consider it, or wait until the economy improves so you could get a higher valuation?
- Are you considering merging your company with another? Are you looking at merger partners as a legitimate exit option in 2009?
- Are you looking to current investors or new investors for additional rounds of financing?
4. Board of Directors/investor-related questions
- How will venture capital investing change in 2009?
- What is your satisfaction with your Board's ability to fundraise in the future? (I think the current environment highlights a board's function as protector of value through fundraising and too few board members are good at it)?
- Compensation for outside board members?
5. Staffing/talent questions
- How are you balancing full time versus contract employees?
- How are you retaining employees during these tough times?
- What kind of retention ideas have you considered to make sure your key folks don't bail for a more stable environment?
- What skills are you as CEO still looking to hire?
- What do you do to conserve cash? attract customers?
- How many of you CEOs have proposed reducing people to part time levels and adding equity compensation instead of releasing them all together?
6. Economy-related questions
- When do you predict the market conditions to take a turn for the better?
There a few industry-specific questions CEOs wanted to ask their peer as well:
Life sciences/biotech-related questions
- What kind of deal structures are you seeing in liquidity-directed partnerships? What kind of partnerships, if any, are you envisioning for discovery stage assets?
Medical devices-related questions
- How do you expect reimbursement to be influenced during the next administration?
