It's been about four months since I've been in San Francisco and Silicon Valley. After the sudden global financial implosion, the environment is certainly different. Company founders are getting cautious. Before the meltdown, tech founders would talk about how great their companies were tracking. Now, the main question is, "What's going to happen to the economy?"
This question is coming from the veteran tech folks, who experienced the harsh dot-com meltdown of 2001-2002. Back then, the optimism was out of control and meant that many companies failed to make the necessary moves to scale back.
But this time feels different.
Yesterday, for example, I met up with Tom McCleary, who is the co-founder of GROUPSwim. Started a couple years ago, the company has built a robust platform that allows businesses to collaborate, such as with wikis, discussion groups, document management and so on.
"I'm very tough on any new expenditures," said McCleary. "There needs to be a good case."
As a result, GROUPSwim is now cash flow positive. "Unless the economy goes into a major tailspin, we should be able to survive under our current cost structure."
It also helps that the price-point of GROUPSwim is fairly affordable and doesn't require approval for capital expenditures. In fact, there is a multi-tiered pricing structure, such as subscriptions and even usage fees.
For the most part, McCleary is a realist. His focus is on the right things: building a needed product, having affordable pricing, and making sure there is more cash coming in than going out. Funny enough, this is really the old-fashioned way of running a business, which seems to get lost in the often starry-eyed tech startup world.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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