Today, Sequoia Capital hosted a mandatory CEO All-Hands Meeting on Sand Hill Road (where else?). There were about 100 CEO's in attendance and let me tell you, the mood was somber. I'm not one to perpetuate doom and gloom or bad news, but let me underscore this for you: We are in a serious economic downturn and this is just the beginning. Immediate, decisive and swift action is required, along with frugal, day-to-day management of expenses and our business is required.

***Here are my notes from the meeting. Keep this note in your in-box and read it every day. I'm serious folks, this is for our survival.***

Speakers:

· Mike Moritz, General Partner, Sequoia Capital (he moderated the speakers).

· Eric Upin, Partner, Sequoia Capital (Eric ran the $26-Billion Stanford Endowment Fund and knows a few things about Economics and investing.)

· Michael Beckwith, Sequoia Capital (Michael was recruited to start Sequoia's very first hedge fund, coming from Maverick Capital and Robertson Stephens. I know him from my BEA days.)

· Doug Leone, , General Partner, Sequoia Capital

Slide projected on the huge conference room screen as people assembled inside the conference center to take their seats: a gravestone with the inscription: RIP, Good Times.

Mike Moritz:

· The only time Sequoia's assembled all CEO's like this was during the dot.com crash.

· We are in drastic times. Drastic times mean drastic measures must be taken to survive. Forget about getting ahead, we're talking survive. Get this point into your heads.

· For those of you that are not cash-flow positive, get there now. Raising capital is nearly impossible if you're too far off of cash flow positive.

· There will be consequences for those who hesitate. Act now.

Eric Upin:

· It's always darkest before it's pitch black.

· Survival of this storm means drastic measures must be taken now, so you will have the opportunity to capitalize on this down turn in the future.

· We are in the beginning of a long cycle, what we call a "Secular Bear Market." This could be a 15 year problem. [many slides on historical charts of previous recessions, averaging 17 year cycles.]

· The credit market [versus the Equity markets] are the issue and will take time to recover.

· Inflection point: Make changes, slash expenses, cut deep and keep marching. You can't be a general if you turn back.

· This is a global issue and not a 'normal' time.

· There is significant risk to growth and your personal wealth.

· Advice:

o Manage what you can control. You can't control the economy, but you can control everything else.

§ Cut spending. Cut fat. Preserve Capital.

§ Don't trust your models and spreadsheets. All assumptions prior to today are wrong.

§ Focus on quality.

§ Reduce risk.

Michael Beckwith:

· Note: Michael had a lot of slides that were charts, data points and comparisons.

· A "V" shaped recovery is unlikely [√]

· Cuts in spending will accelerate in Q4/Q1. Look at eBay-this is just the beginning.

Doug Leone:

· This is a different animal and will take years to recover.

· Getting another round if you're not profitable will be rough.

· Do everything possible to get to cash flow positive. Now.

· Nail your Sales and Marketing message.

· Pound your competitors shortcomings. They're hurting and they will be quiet. Take the offensive.

· In a downturn, aggressive PR and Communications strategy is key.

· M&A will decrease dramatically and only lean companies, with proven sales models will be acquired.

· Spectrum discussion:

o Capital Preservation ß—————————————————à Grab Market

o Everyone should be far to the left (capital preservation)

· Requirements of our companies:

o You must have a proven product

o You must cut expenses. Now and deep.

o Your product should reduce expenses and drive revenue [NOTE: I want to revisit this with the Management team. Our solution does both, we need to quickly and crisply define the sound bite here.]

o Honestly assess your solution vs. your competitors.

o Cash is king [have you gotten this message yet?]

o You must get to profitability as soon as possible to weather this storm and be self-sustaining.

· Operations review:

o Engineering: Since you already have a product, strongly consider reducing the number of engineers that you have.

o Product: What features are absolutely essential? Choose carefully and focus.

o Marketing: Measure everything and cut what is not working. You don't need large Product Marketing, Product Management teams.

o Sales & Business Development: What is your return on this investment? The Valley has gotten fat with Sales people: Big bases, big variables. Cut base salaries on sales people, highly leverage them with upside (increase variable) and make people pay for themselves via increased sales productivity. Don't add sales people until you've achieved your goals with sales productivity. Be disciplined.

o Pipeline: Scrub the shit out of it and be honest with yourself.

o Finance: Defer payments, what is essential? Kill cash burn.

· Death Spiral (Nobody moves fast enough in times like these, so get going and research later.)

o The death spiral sucks you in, you're in it before you know it and then you die.

o Survival of the quickest.

o Cutting deeper is the formula for survival.

o You should have at least one year's worth of cash on hand.

o Tactics:

§ Assess your situation. Drop your assumptions, start with a blank page and start zero-based budgeting.

§ Adapt quickly

§ Make your cuts

§ Review all salaries

§ Change sales comp

§ Bolster your balance sheet-if you can add $5M to your coffers, take it and save it.

§ Spend like it's your last dollar.

· Get Real or Go Home.

I would be more impressed if Sequoia hadn't pulled this act before when the last bubble burst. True, they called the movement of the market. But it's conventional wisdom today that the economy is tanking.

But what does the economy have to do with the startups Sequoia funds? The whole point of venture capital is to nurture companies that need capital. Part of the art of investing in startups is knowing when to push them out of the nest. Templated cost-cutting advice, applied across Sequoia's portfolio, is hardly a value-add.

And it's not clear how this was bad advice a year ago. Sequoia's portfolio should have been keeping a close eye on costs then as now. The IPO market is definitely ailing now, but it's hardly been healthy over the last few years. Large acquisitions have been scant since MySpace and YouTube got bought. The chaos on Wall Street doesn't change the bleak outlook for exiting startup investments profitably that existed beforehand.

So what's really going on here? Consider two of the companies that heard Sequoia's speeches last time around: PayPal and Google. They both spent and grew aggressively in the face of a local recession. They both managed to IPO when few tech companies were going public. And they both delivered handsome profits to Sequoia.

I'm just guessing at Moritz's game, but here's what I suspect is going through his head: He could have delivered a cost-cutting sermon a year ago, true. But his entrepreneurs are far more likely to listen to it now. And the rest of Silicon Valley is listening, too. He's made his bit of noise, knowing full well word would leak out, and put a scare in all his competitors.

How convenient that this scare-tactics summit was held just a month after Sequoia raised $1.7 billion in new funds. While everyone else is hunkering down, Sequoia will cull the weaklings from its portfolio, double down on the winners — and profit before anyone realizes the good times are back. Well played, Michael, well played.

Here's HealthCentral.com and its other sites.
And now, versus WebMD.
Looks pretty bad for HealthCentral, but it's early yet. The site only changed its name to HealthCentral in 2006.

Not many in the Silicon Valley money crowd support Hillary Clinton. The notable exception is John Doerr, who now counts former VP Al Gore as a colleague at Kleiner Perkins.

The list is lengthier for Barack Obama.

• David Anderson, managing director, Sutter Hill Ventures
  
• John Thompson, Symantec CEO
  
• Gordon Eubanks, former Symantec CEO
  
• Yahoo exec Brad Garlinghouse
  
• Former California gubernatorial candidate, current Steve Jurvetson pal and Tesla Motors board member Steve Westly
  
• John Roos, CEO of law firm Wilson Sonsini Goodrich & Rosati
  
• Google execs David Drummond and Marissa Mayer
  
• Google.org director Larry Brilliant
  
• YouTube founder Chad Hurley
  
• VC Doug Hickey of Hummer Winblad Venture Partners
  
• VC Stewart Alsop of Alsop Louie
  
• Electronic Arts CEO John Riccitielo
  
• Sequoia Capital venture capitalist Michael Moritz
  
• Craiglist founder Craig Newmark
  
• Netscape and Ning founder Marc Andreessen (who also supports Mitt Romney)

(Photo by azrainman)

Technically, the sale makes sense. Plaxo's chief platform architect, Joseph Smarr, is an engineering rock star, with many fans among the Valley's brainiac collectors. And Facebook CEO Mark Zuckerberg is said to admire other members of Plaxo's engineering team. The process of synching multiple address books, Plaxo's specialty, is more complex than it sounds, and would save Facebook some trouble as it tries to become more of a hub for its users' online activities on and off the Facebook site.

Bringing the investors to terms, however, would prove troublesome. Michael Moritz, of Sequoia Capital, is said to be eager to get a stake in Facebook, however small, so it can claim to have had a hand in its success. It's a move he played skillfully in the first bubble when he merged a failing online bank, X.com, into Peter Thiel's PayPal.

Thiel, now a Facebook board member and venture capitalist in his own right, remembers that maneuver all too keenly, and believes Moritz got the better of him in the deal. Then, too, Moritz forced Sean Parker, now a partner in Thiel's Founders Fund, out of Plaxo; he next joined Facebook, and while he didn't stay long, he still owns a substantial stake in the company. Any deal that reunites Sequoia, Thiel, and Parker would produce a moment of boardroom drama the likes of which we haven't seen in a long while.

The talks aren't advanced, and haven't even reached the point of naming numbers. But Facebook's lofty $15 billion valuation gives it a currency for acquisitions. Will Plaxo take Facebook's paper? The decision, if it ever comes to that, will rest in part with Thiel. How delicious it would be to have Moritz at a disadvantage.