Tim Chang on how to survive the economy: "Actually selling goods and services again as a business mo
Tim Chang is a good friend and a well known VC at Norwest Venture Partners, and he focuses on wireless and digital media. I had the chance to pick Tim Chang's brain on everything from the economy's impact on startups to what he's looking to invest in today. Dealmaker Media (DMM): There’s a lot of chatter about how the sinking economy will impact startups, including the mobile sector. What, if any, are the media and pundits not talking about that startups should know about or be concerned with? What’s your perspective, as a VC, on today’s economy and how your portfolio companies may be affected?Tim Chang (TC): As many have read about, VCs are advising that their startups proactively cut their burn-rate and focus on surviving the downturn -- if possible, avoiding the need to raise money through 2009 and try to be "last man standing" in your space out in 2010: if you can be breakeven at that point, your company will have many options in terms of roll-ups, expansion, etc. as the market recovers. Keep in mind that this downturn seems to systemically different from the last dot-com era bust -- this seems goes far beyond just the valley and tech industry... Many of the startups founded in the past couple years may face considerable challenge over the next 18-24 months if they don't have a path towards steady monetization, so focusing on low burn and actually selling goods and services again as a business model is key.DMM: What’s the coolest mobile company you’ve seen in the past 12 months? Did you invest? Why or why not?TC: Skydeck is very interesting in terms of social graph mining and analytics, and I'm also a fan of what Mobillcash has done. In terms of mobile and digital media, I've been focused on outsourced services: my most recent investment was in a company called PCH International, which provides turnkey logistics solutions to the device and hardwarde industry, from outsourced product design and manufacturing, to packaging design, fulfillment, and shipping to the end-user. They can do to CE and devices what CafePress has done for custom soft goods and what Li&Fung did to the garment industry. Not as hyped an area as some of the innovations in iPhone and smartphone apps coming out right now, but the business model innovation of "fabless manufacturing" is revolutionary and the revenue levels involved are substantial.DMM: What will you be looking for at Under the Radar? (sub-sectors, company stages, team compositions etc.)TC: I'm interested in AppStore-like distribution models, alternative monetization and payment systems, and transaction processing overall fueled by smartphone app growth. Still hunting for next-gen browsers as well as enteprise mobility 2.0 plays.DMM: In your opinion, what book or blog should every 1st time entrepreneur read?TC: Seth Godin's books on marketing, "The Little Red Book of Selling," and "Predictably Irrational" are usual frameworks for entrepreneurs -- everything in life is Sales & Marketing/Pop-Psychology, from dating to fundraising, to recruiting and company building!DMM: How can startups get in touch with you?TC: One of the best ways to reach a VC is through a mutual friend or trusted contact -- warm intros are the best way to ensure that your deal stands out above the noise. Use social networking tools and prior portfolio companies of the VC firm to figure out who you might know in common. Also, building your reputation and buzz as "one to watch" within your sector is the best kind of marketing of all -- this goes beyond PR and advertising when industry pundits and bloggers are writing about you, and when the customers and distribution channels that VCs turn to for market validation and due diligence (carriers, handset makers, publishers, etc.) are mentioning your company's name to us as well.
