pimg class="float_right" src="/~~/f?id=47a93a374b543772005e74bfmaxX=200maxY=150" border="0" alt="grinch-santa.jpg" title="grinch-santa.jpg" width="200" height="150" /To save money and avoid looking too celebratory in scary economic times, Google (GOOG) is a href="http://www.reuters.com/article/technologyNews/idUSTRE4AK8G920081122"cutting back on its holiday parties/a this year, too./p p style="padding-left: 30px;"a href="http://www.reuters.com/article/technologyNews/idUSTRE4AK8G920081122"Reuters/a: Google has fared better than most tech companies, but departments at the Internet company will have smaller events this year to encourage camaraderie between employees and celebrate more economically, said the source. Team holiday activities will include spending an afternoon volunteering followed by evening social activities such as dinner parties and museum outings in San Francisco./p p style="padding-left: 30px;"span/span/p p style="padding-left: 30px;"This is a striking difference from previous years, when Google holiday parties included ice sculptures of the company's logo, virtual reality video game stations, karaoke booths, sushi buffets and burlesque dancers./p p style="padding-left: 30px;"span/span/p p style="padding-left: 30px;"Last year a party crowd of 10,000 spread throughout the Shoreline Amphitheater, near Google headquarters in Mountain View, California, said workers -- called Googlers./p pstrongSee Also:/strongbr /a href="../../2008/11/google-lets-you-roll-your-own-search-results-goog-"Google Lets You Roll Your Own Search Results/abr /a href="../../2008/11/google-chrome-needs-add-ons"Why Google Chrome Needs Add-Ons: Firefox Users Download 1 Billion/abr /a href="../../2008/11/google-considers-buying-chrome-market-share"Google Considers Buying Chrome Market Share/a/p pa href="http://feedads.googleadservices.com/~at/1TwW8sA-qlRaaYq90sWOvhkVRmc/a"img src="http://feedads.googleadservices.com/~at/1TwW8sA-qlRaaYq90sWOvhkVRmc/i" border="0" ismap="true"/img/a/pdiv class="feedflare" a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=ONLLCpuL"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?i=ONLLCpuL" border="0"/img/a a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=JUVeEHo3"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?d=52" border="0"/img/a a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=Gb5NXR0w"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?d=80" border="0"/img/a a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=v0QfvSQ2"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?i=v0QfvSQ2" border="0"/img/a a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=7ChxbGsE"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?d=131" border="0"/img/a a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=T8IvqegB"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?d=336" border="0"/img/a a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=9cP6z07B"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?d=41" border="0"/img/a a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=JlBD6PH5"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?d=50" border="0"/img/a /divimg src="http://feedproxy.google.com/~r/typepad/alleyinsider/silicon_alley_insider/~4/E_Fq-hjOOC0" height="1" width="1"/

In these perilous economic times, the layoff memos often follow a familiar refrain: “We have cut costs by 20 percent. That gives us an additional year’s runway. Or two.” But while yes, companies can cut costs and prolong their survival, when it comes to startups, just because they can doesn’t mean they should.

I’m speaking here of venture-backed startups, which represent a small minority of companies. The sole purpose of most companies is to create a steady income stream for their owners and operators — in other words, survival. Venture-backed startups, on the other hand, are created with the sole purpose of a successful exit.

Why growth is crucial

Whether that exit comes in the form of an acquisition or an IPO, in the meantime, the lifeblood of any startup is growth, be it in terms of customers, usage, revenues or profits. Under most economic conditions, an IPO is impossible without revenue and profit growth, and we are unlikely to see that change any time soon. From an acquisition point of view, stagnant companies are valued at low multiples of revenue, say 1x-2x. And while popular meme suggests that flat is the new growth — given the downturn in the economy, the argument goes, even keeping revenues flat is sufficient — this argument does not apply to startups.

By definition, startups are supposed to be attacking nascent market opportunities and unsaturated markets, and as such should be able to grow even during a downturn. If a startup cannot find growth in this environment, it’s a clear message that the market opportunity might be better served by an established company. Of course, growth in profits or revenues are far better than just growth in usage, but even growth in usage is better than stagnation on all three fronts. There is at least the possibility that a company with strong usage growth might one day be attractive to an acquirer with a good monetization engine.

It’s no fun to work at a startup that isn’t growing. Stagnation leads to low morale, with people sitting around waiting for the axe to fall. Rather than let the company become a zombie, management would be doing their investors and employees a favor by pulling the plug and returning the remaining capital to investors.

Why VCs often don’t put companies out of their misery

Founders and executives have a lot of emotional capital invested in their companies, so when it comes to making the ultimate decision, their reluctance is understandable. What’s surprising is how often VCs let companies turn into zombies. The reason for this is a subtle misalignment of interests between VCs and their investors. As long as a startup still appears to be, on some level, alive, VCs can carry the company on their books at the valuation set by the last round of financing. Once they pull the plug, the fund will receive pennies on the dollar, a loss that has to be recorded on the books and doesn’t look good when the firm goes to raise their next fund. Every VC portfolio, therefore, has its fair share of zombies.

Another contributing factor is excessive preference overhangs. Investors receive preferred stock with the right to get back their invested capital ahead of common shareholders in an exit; in some cases they have the right to receive a multiple of their invested capital ahead of common shareholders. The total amount that investors need to receive before common shareholders can participate in an exit is called the “preference overhang.”

If a company has raised so much capital that any realistic acquisition will be below the overhang, then common shareholders stand to receive nothing from the sale — and company management has no incentive to look for such an exit. In such cases, it’s important for the VCs and management to agree to restructure the preference overhangs to make such exits attractive to management. Otherwise the company is destined to become a zombie.

Every startup founder and employee has to consider three possible outcomes: success, failure and zombiehood. Success is much better than failure, but quick failure beats wasting years of your life on a zombie. If you are a company founder, and you are considering layoffs to extend the runway (perhaps on the advice of your venture investor), you should look in the mirror and ask yourself whether you are cutting away your growth opportunity and just choosing a lingering death over a quick one.

Anand Rajaraman is a co-founder of Kosmix and Founding Partner of Cambrian Ventures. Disclosure: He is also an investor in Giga Omni Media, parent company of GigaOM.

In these perilous economic times, the layoff memos often follow a familiar refrain: “We have cut costs by 20 percent. That gives us an additional year’s runway. Or two.” But while yes, companies can cut costs and prolong their survival, when it comes to startups, just because they can doesn’t mean they should.

I’m speaking here of venture-backed startups, which represent a small minority of companies. The sole purpose of most companies is to create a steady income stream for their owners and operators — in other words, survival. Venture-backed startups, on the other hand, are created with the sole purpose of a successful exit.

Why growth is crucial

Whether that exit comes in the form of an acquisition or an IPO, in the meantime, the lifeblood of any startup is growth, be it in terms of customers, usage, revenues or profits. Under most economic conditions, an IPO is impossible without revenue and profit growth, and we are unlikely to see that change any time soon. From an acquisition point of view, stagnant companies are valued at low multiples of revenue, say 1x-2x. And while popular meme suggests that flat is the new growth — given the downturn in the economy, the argument goes, even keeping revenues flat is sufficient — this argument does not apply to startups.

By definition, startups are supposed to be attacking nascent market opportunities and unsaturated markets, and as such should be able to grow even during a downturn. If a startup cannot find growth in this environment, it’s a clear message that the market opportunity might be better served by an established company. Of course, growth in profits or revenues are far better than just growth in usage, but even growth in usage is better than stagnation on all three fronts. There is at least the possibility that a company with strong usage growth might one day be attractive to an acquirer with a good monetization engine.

It’s no fun to work at a startup that isn’t growing. Stagnation leads to low morale, with people sitting around waiting for the axe to fall. Rather than let the company become a zombie, management would be doing their investors and employees a favor by pulling the plug and returning the remaining capital to investors.

Why VCs often don’t put companies out of their misery

Founders and executives have a lot of emotional capital invested in their companies, so when it comes to making the ultimate decision, their reluctance is understandable. What’s surprising is how often VCs let companies turn into zombies. The reason for this is a subtle misalignment of interests between VCs and their investors. As long as a startup still appears to be, on some level, alive, VCs can carry the company on their books at the valuation set by the last round of financing. Once they pull the plug, the fund will receive pennies on the dollar, a loss that has to be recorded on the books and doesn’t look good when the firm goes to raise their next fund. Every VC portfolio, therefore, has its fair share of zombies.

Another contributing factor is excessive preference overhangs. Investors receive preferred stock with the right to get back their invested capital ahead of common shareholders in an exit; in some cases they have the right to receive a multiple of their invested capital ahead of common shareholders. The total amount that investors need to receive before common shareholders can participate in an exit is called the “preference overhang.”

If a company has raised so much capital that any realistic acquisition will be below the overhang, then common shareholders stand to receive nothing from the sale — and company management has no incentive to look for such an exit. In such cases, it’s important for the VCs and management to agree to restructure the preference overhangs to make such exits attractive to management. Otherwise the company is destined to become a zombie.

Every startup founder and employee has to consider three possible outcomes: success, failure and zombiehood. Success is much better than failure, but quick failure beats wasting years of your life on a zombie. If you are a company founder, and you are considering layoffs to extend the runway (perhaps on the advice of your venture investor), you should look in the mirror and ask yourself whether you are cutting away your growth opportunity and just choosing a lingering death over a quick one.

Anand Rajaraman is a co-founder of Kosmix and Founding Partner of Cambrian Ventures. Disclosure: He is also an investor in Giga Omni Media, parent company of GigaOM.

These are the economic times that try men’s souls, and women’s too. In the past few months, a lot of people have seen their net worth fall substantially, and I’m sure more than a few have contemplated what would happen if they lost everything. nbsp; nbsp; So we asked a group of people — Nick Mills, Josh Piven, Adam Shepard, Will Wilkinson, and Ann Wroe — to consider the following scenario: nbsp; nbsp; Imagine you just lost all your possessions and money, and you were suddenly living in the streets. nbsp; nbsp; 1. What’s the first move you would make? nbsp; 2. What’s the first organization you would turn to? nbsp; 3. What would your extended plan look like? nbsp; nbsp; Here are their answers. I have to admit, I’ve thought about this scenario myself many times in my life and my answers bear scant resemblance to those given below. I will not go into detail because I don’t want to pollute your reading experience; part of the fun of these quorums is to throw a question out there and be surprised by the answers. nbsp; nbsp; I am, however, interested to hear your comments.

First they tell u you will have them by September, then they go their usual say-nothing, eventually it will be some time in 2009 - makes microsoft windows releases look timely...

The real problem with push notification is the problem they will have with server load. And the solution - Apple will require you to subscribe monthly/annually for an ongoing fee of their choosing. Thats whats taking so long...

Apple is only interested in making money in the current economic times - thats why they have their developers writing software iTunes geniuses, over-the-air-pay-for prodcasts, etc. instead of what we want, e.g. flash/mms/cut-paste NOT because they are demanded but because they make them money.

Many will say ok - they are commercial - but what happened to putting the customer first?

Not everyone is slashing jobs in these grim economic times. Microsoft Corp. has no plans to cut back on research spending and plans to add workers in the coming year, senior executive Craig Mundie said Friday.div class="feedflare" a href="http://feeds.feedburner.com/~f/ibtimes/tech?a=rAOkN"img src="http://feeds.feedburner.com/~f/ibtimes/tech?i=rAOkN" border="0"/img/a a href="http://feeds.feedburner.com/~f/ibtimes/tech?a=28cnn"img src="http://feeds.feedburner.com/~f/ibtimes/tech?i=28cnn" border="0"/img/a a href="http://feeds.feedburner.com/~f/ibtimes/tech?a=2za9n"img src="http://feeds.feedburner.com/~f/ibtimes/tech?i=2za9n" border="0"/img/a /divimg src="http://feeds.feedburner.com/~r/ibtimes/tech/~4/461097209" height="1" width="1"/

pimg class="float_right" src="/~~/f?id=490200ec796c7a3d006cb27emaxX=290maxY=155" border="0" alt="Titanic.jpg" title="Titanic.jpg" width="290" height="155" /After the market closed today a href="http://biz.yahoo.com/bw/081120/20081120006262.html?.v=1"the New York Times announced it would cut its dividend/a from 23 cents a share to 6 cents, which will save the company $97.8 million a year. Lord knows a href="http://www.alleyinsider.com/2008/11/cash-crunch-at-new-york-times-nyt-400-million-due-in-may"they need the cash/a. It probably would have been wise to cut the dividend to zero, but this is still a big step in the right direction. The stock now sits at $5.72 a share./p pstrongFull Release:/strong/p pThe New York Times Company's Board of Directors today declared a quarterly dividend of $.06 per share on the Company's Class A and Class B common stock, down from $.23 per share in the third quarter of 2008. The dividend is payable on December 15, 2008, to shareholders of record on December 1, 2008./p p'This was a difficult but necessary decision that will provide us with greater financial flexibility in these uncertain economic times,' said Arthur Sulzberger, Jr., chairman of the Company. 'Most industries are feeling the need to conserve cash and ours is as well, particularly given the secular challenges we face. Throughout our history, we have successfully weathered difficult periods by maintaining our brand promise of providing high-quality journalism. In order to continue to do so, we have taken decisive steps to reduce capital spending, lower operating costs and re-evaluate our assets. We expect that this steep cut in the dividend, coupled with our other actions, will help us decrease debt and improve the liquidity of the Company, a prudent measure in this operating environment.'/p pa href="http://feedads.googleadservices.com/~a/OY7Dun_QRI-HSVRRPzsdg8S_d-A/a"img src="http://feedads.googleadservices.com/~a/OY7Dun_QRI-HSVRRPzsdg8S_d-A/i" border="0" ismap="true"/img/a/pdiv class="feedflare" a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=FrU9SHoG"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?i=FrU9SHoG" border="0"/img/a a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=QcooVXu0"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?d=52" border="0"/img/a a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=Vf6YmPJN"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?d=80" border="0"/img/a a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=imAajFbE"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?i=imAajFbE" border="0"/img/a a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=LGPw6ria"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?d=131" border="0"/img/a a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=4ZBEoCas"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?d=336" border="0"/img/a a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=eJrsblRR"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?d=41" border="0"/img/a a href="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?a=2KyeCRMG"img src="http://feedproxy.google.com/~f/typepad/alleyinsider/silicon_alley_insider?d=50" border="0"/img/a /divimg src="http://feedproxy.google.com/~r/typepad/alleyinsider/silicon_alley_insider/~4/Ou4lfAYtSS4" height="1" width="1"/

Economic downturns are hard for everyone, at both work and at home. Week after week there are requests for managers to further reduce budgets, lay off more people and cut projects that were previously classified as “necessary to sustain normal business operations.” These pressures forge managers made of diamond, and those who perform well in both boom and bust are destined for greatness. The very best managers get out ahead of downturns and take action early to minimize shareholder losses and, ideally, create shareholder value.

Here are six simple questions to determine if you are one of these managers.

• Do you treat economic hardships in your business as a time to relax, or do you look to improve your skills?
• Do you constantly push back when new budget cuts come along, or are you offering up cost savings ahead of requests from higher level executives?
• Do you complain that you are too short handed to accomplish your mission, or do you spend time developing tools, systems and metrics that help you determine how to get more done with less people?
• Are your top performers worried about losing their jobs, or do you spend time nurturing them and growing them to be even more successful in their positions?
• Do you complain that you need all of your folks, or are you constantly weeding your team of underperformers without replacing them when times are rough?
• Do you treat hiring freezes as interview freezes, or are you constantly looking to find bigger and better talent so that you can move quickly when it’s time to hire again?

These questions help illustrate some of the steps we believe define exemplary leaders and managers in tough economic times. Put more directly, we think that the following are some of the five things that great managers and leaders do during economic downturns that help prove they are “the best of the best”:

1. Upgrading skills. This can be anything from getting an additional degree in your area of expertise, to getting a degree in a field adjacent to yours (technologists getting an MBA or marketing folks deepening their technology), to taking continuing education courses or just taking some time to become current with your job through professional reading. The best leaders and managers see being “the best” as a journey rather than a destination. We cover this in more detail in “To Get Better You Must Practice.”

2. Make More with Less. Stop talking about being the best and prove it. Put the systems in place that allow you to measure how much shareholder value you create with every dollar you spend on headcount or systems. Show how you can do more next year with the same budget or — better yet — more with less money. If you aren’t doing this as a standard operating procedure, start doing it while the economy is struggling, and you will absolutely be seen as being one of the best.

3. Mind Your Flowers. Whether you are making difficult headcount cuts or not — but especially if you are — you need to take care of the folks who are creating the most shareholder value within your organization. Exit the economic downturn with your best people on your side — not the folks with the longest tenure but the folks who create the most value.

4. Weed Your Garden. The best managers during great times are always looking to remove underperformers from their teams and upgrade them with superior performers. The best managers during economic hard times are ahead of the headcount cuts with a list of the folks who should be removed from their team for poor performance. Don’t ask if other organizations are getting their fair share of cuts; focus on what’s right for the shareholder and get it done ahead of the request!

5. Get Ready for Spring Planting. It may not seem like it today, but things will turn around; if not for your current employer then for your next employer. You need to have that list of great talent with whom you’ve been interviewing ready so that you can quickly augment your existing team as the need arises, or build your next team if your current employer doesn’t survive the downturn. Leadership is as much about people as anything else, and great leaders focus on building great teams.

Marty Abbott and Michael Fisher are partners with AKF Partners.

Economic downturns are hard for everyone, at both work and at home. Week after week there are requests for managers to further reduce budgets, lay off more people and cut projects that were previously classified as “necessary to sustain normal business operations.” These pressures forge managers made of diamond, and those who perform well in both boom and bust are destined for greatness. The very best managers get out ahead of downturns and take action early to minimize shareholder losses and, ideally, create shareholder value.

Here are six simple questions to determine if you are one of these managers.

• Do you treat economic hardships in your business as a time to relax, or do you look to improve your skills?
• Do you constantly push back when new budget cuts come along, or are you offering up cost savings ahead of requests from higher level executives?
• Do you complain that you are too short handed to accomplish your mission, or do you spend time developing tools, systems and metrics that help you determine how to get more done with less people?
• Are your top performers worried about losing their jobs, or do you spend time nurturing them and growing them to be even more successful in their positions?
• Do you complain that you need all of your folks, or are you constantly weeding your team of underperformers without replacing them when times are rough?
• Do you treat hiring freezes as interview freezes, or are you constantly looking to find bigger and better talent so that you can move quickly when it’s time to hire again?

These questions help illustrate some of the steps we believe define exemplary leaders and managers in tough economic times. Put more directly, we think that the following are some of the five things that great managers and leaders do during economic downturns that help prove they are “the best of the best”:

1. Upgrading skills. This can be anything from getting an additional degree in your area of expertise, to getting a degree in a field adjacent to yours (technologists getting an MBA or marketing folks deepening their technology), to taking continuing education courses or just taking some time to become current with your job through professional reading. The best leaders and managers see being “the best” as a journey rather than a destination. We cover this in more detail in “To Get Better You Must Practice.”

2. Make More with Less. Stop talking about being the best and prove it. Put the systems in place that allow you to measure how much shareholder value you create with every dollar you spend on headcount or systems. Show how you can do more next year with the same budget or — better yet — more with less money. If you aren’t doing this as a standard operating procedure, start doing it while the economy is struggling, and you will absolutely be seen as being one of the best.

3. Mind Your Flowers. Whether you are making difficult headcount cuts or not — but especially if you are — you need to take care of the folks who are creating the most shareholder value within your organization. Exit the economic downturn with your best people on your side — not the folks with the longest tenure but the folks who create the most value.

4. Weed Your Garden. The best managers during great times are always looking to remove underperformers from their teams and upgrade them with superior performers. The best managers during economic hard times are ahead of the headcount cuts with a list of the folks who should be removed from their team for poor performance. Don’t ask if other organizations are getting their fair share of cuts; focus on what’s right for the shareholder and get it done ahead of the request!

5. Get Ready for Spring Planting. It may not seem like it today, but things will turn around; if not for your current employer then for your next employer. You need to have that list of great talent with whom you’ve been interviewing ready so that you can quickly augment your existing team as the need arises, or build your next team if your current employer doesn’t survive the downturn. Leadership is as much about people as anything else, and great leaders focus on building great teams.

Marty Abbott and Michael Fisher are partners with AKF Partners.