One of the worst feelings in the professional world is having to let people go not due to performance (that's easy) but due to financial constraints. I've been reading about the latest rounds of lay-offs in our sector and it's pretty sad.

It's times like this that I'm so glad we've decided to stay lean. Yeah, maybe a project gets delayed here and there but I'll take that over having to tell someone they lost their job not because it was their fault but because it was my fault for not planning properly ahead of time. It's just unfortunate that it took a soft investment market for companies to realize they should pay attention to pesky little things like revenues and/or profits. My personal philosophy has always been that if cash flow cannot support a full-time employee (salary, benefits, taxes, etc) PLUS at least 25%, then don't hire that person. If it's a revenue generating position, have the person work on commission until they generate enough cash flow per the last sentence. Maybe it's time start-ups began running their businesses like nearly all the other businesses out there (ie, make profits now) instead of waiting for that next round or the buy out.

I'm reading Jessica Livingston's "Founder at Work" book and one particular chapter is quite appropriate. It's about how Charles Geschke and John Warnock only needed about $50K to start Adobe and that shortly thereafter they got $1 million plus contracts from guys like Apple and others to license their printing software. Why don't entrepreneurs think like that any more? Build something, make more money than you spent building it, repeat. Maybe that's just too pedestrian for today's founders but that's one way to ensure your business is recession proof. Another great read is Paul Graham's article about starting a technology company during a recession.

For full disclosure, I sold every last stock that I owned right after the first dot-com bust in 2000/2001 so I never get overly excited or bummed when the market does well or not. I still track the usual suspects in my industry though and noticed an interesting trend. Below is today's results for Google, Yahoo, and Microsoft.

Not a bad day all around. But does it seem bad that Yahoo isn't rebounding as much as the others. Shouldn't a rising tide raise all ships? A more alarming stat is that since October 1st, Yahoo has fallen almost 38% while Google and Microsoft have fallen a little over 24% and 23%, respectively. I hope the folks over at Yahoo can pull through this. I think with 3 major companies in the online space, there will be more competition and innovation. I've always tried to stay loyal to Yahoo but gave up using their search engine a couple of years ago. Still have my My Yahoo page and like their Sports section and I'm sure their other properties are doing well. Still, they need to shore up their search technology and NOT do the Google deal as that is a slippery slope down to technology mediocrity no matter what they say. Given the choice every quarter of whether to invest in technology or squeeze out a few more pennies per share in earnings by using Google technology, I'd say most folks would take the easier path. Let's hope I'm wrong.

I wrote something about this earlier on my Twitter page but thought it deserved a little more space here.  My partner, Ike, will be writing a regular column in the Huffington Post regarding consumer credit.  Obviously, it's very timely given what's going on in the world.  Couldn't have gotten a more qualified person to write the column given Ike's background as one of the pioneers in online consumer credit.  Check it out here.

On a totally unrelated note, I've finally caught up to the world by getting a plasma TV.  Got a great deal on eBay for a used Panasonic (take advantage of that Microsoft 30% CashBack!).  Now that BlueRay is the rage, I'll wait another 5 years for the players to go sub-$100.  I'm all about the value!

I'm having lunch at my local Vietnamese joint and I'm overhearing a political discussion (in Vietnamese) regarding McCain and Obama. One guy is saying that he's voting for Obama because he thinks Republicans have messed up the last 8 years and he wants a Democrat to be in office. The other guy basically agrees with him that the nation has been screwed up but said he would vote for McCain because he didn't "trust" a black person.

I have to say I'm pretty ashamed that a Vietnamese person would rather vote for a candidate who publicly used a racist slur to describe Vietnamese people than someone who was black. How fuckin' stupid are you? If you won't vote for Obama because you're a registered Republican or you think he'll raise your taxes or you don't think he has enough foreign policy experience, that's cool. Those are valid reasons. But to base your decision on someone based on race is just ignorant.

To be fair, McCain did apologize and tried to justify the use of the slur by saying it only applied to his captors. But as I've said to many a person before, once you have reached the level of hatred for a group of people to actual use a racial slur to describe them, it's not easy to distinguish individuals. You can't say, "I hate [insert racial slur], but not all [ethnic group] people. Just those who wronged me." Why not just say, "I hate the people who wronged me"?

And so I don't sound hypocritical, I'm not voting for McCain because of the racial slur. I don't agree with his tax policy, "my way or else" foreign policy, and his poor choice in running mate.

Not literally, of course. Anyone who knows me will agree I could lose a few lbs. I'm speaking from the start-up sense. I just read an article on Techcrunch that VC backed start-ups are having a hard time exiting. The post right after it was that Eyespot ran out of cash and shut down. I've never used the Eyespot service but it looks like it took some heavy engineering to get it done. To that end, they raised about $3.6 million and hired 22 people. I'm sure they also got an office, computers, water, etc. to support these 22 people. That's a lot of infrastructure cost and it looks like they didn't have the revenues to support it.

Taking the lessons learned from our last start-up, we definitely decided to go lean the second time around. Case in point, at our last start-up we got a 3 year lease on almost 5,000 sq. ft. of office space when we only had 6 employees (we were going to grow into it - so we thought). Turns out that the lease was one of our biggest cash sinks. Start-up number two? We share desks in a shared office space. Here's a shot of our messy work area.

We did this when we didn't generate any revenue because since we boot-strapped this venture, we thought it better to spend our limited funds on talent versus rent. It turned out to be a good move as we weathered through some lean months before ultimately hitting our stride and becoming cash flow positive. Fast forward to over a year and we're still sitting at the same desk except now we rent out a few more desks as we've grown. Once we have built enough of a cash flow cushion, we MIGHT think about getting a separate office space. Part of me has become attached to the more intimate setup, though. We now easily bounce ideas of each other which will become harder once everyone has their own desk. I guess that's the price of progress though.