How To Prepare For The Next High Tech Downturn? Having A Strong Balance Sheet Is Not Sufficient.

How To Prepare For The Next High Tech Downturn? Having A Strong Balance Sheet Is Not Sufficient.

If we ask people how to prepare for the next high tech downturn, most people will probably say strong cash position. But the problem is we don't know when the downturn is coming and how long it will last? If the recession last much longer than the cash you have on hand, it won't matter any more.

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This is what Ben Horowitz found out when one of Loudcloud biggest customers Atriax was bankrupt. As a result, they were not able to raise more cash through private investment.This leaves them with no choice but to sell the company.

The key learning is having strong cash position is always a plus but it is not as good as having a stable source of revenue. Companies with a pipeline of customers with strong financial will have a much better chance of surviving the downturn.