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Can anyone confirm that number? Unless there
was a secret round or they are spending a whole
lot less than it seems, the numbers just don't
add up to anything like over $100M in cash
left at procket.
And if they had that much money, there would
have been no layoff.
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Randall Kruep and Tony Li are two guys who have had huge success in their careers. I'll bet on them any day of the week, vs. the 500 half assed hype machine, no name startups trying to do optical this and thats and begging for asset sales to save face.
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The problem for those of us who have sat through
Procket presentations is that procket is
very much a hype machine that trades more off
Tony's reputation than its own products or
their features.
its cash and had to make these cuts.
I was attacking a particular set of comments
(idle engineers,etc) rather than prockets actions
which I would expect are going to be carefully
thought out.
The problem is that there is no end in sight to this lousy economy. Regardless of whether a company has 10, 100, or 200mil in the bank, unless you are cash flow positive you are in trouble. I am not defending Procket, however I do fully understand the dilemma they are in. Until they are able to generate substantial traction, Procket has to tightly manage its outgoing cash flow. The unfortunate part is that the people who had contributed in large part to where Procket is today are being let go. Coming from a failed startup, I certainly know how they feel.
Let me pose this another way: What should Procket do to survive until the economy turns around (assuming that when it does they can be successful)?
The way I see it:
1. Going for another round is most likely out of the question, given the $$$ already invested in the company. Besides, it would almost have to be a washout round which is unattractive.
2. Going public is also out of the question - it requires customer traction and a positive balance sheet, something I'm sure Procket is working on.
3. Going into hibernation is the quickest way to fail, as something like 95% of all private companies that go into hibernation never wake up again.
4. Sell the company - I just don't see it happening anytime soon given the market.
5. Developing a partnership with a large established vendor to generate additional funding is a possiblity; interested to see if this is an avenue Procket takes.
6. Refocus the organization to ensure that it is given a fighting chance to reach profitability. While painful, the reality is that Procket needs to sell the product, now that it is released.
I don't often disagree with you, but here is one example where I do. The reality is that we don't know how many or what positions were affected, so it is impossible to say what the long term impact will be to Procket. The short term impact sucks - my sympathies to those that were let go.
signmeup
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That is just pure stupidity. Companies that
fire the engineers are usually in money-trouble.
And when a startup starts to talk about firing
people and becoming "sales oriented", they are
setting themselves up for either a quick sale
of the company or a disaster.
fire the engineers are usually in money-trouble.
And when a startup starts to talk about firing
people and becoming "sales oriented", they are
setting themselves up for either a quick sale
of the company or a disaster.
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It's a common strategy these days for equipment startups to have RIFs at key milestones.
A company that builds a product with ASICs can't justify keeping a large ASIC team once the chips are in-house and verified. There's no funding for the next-generation ASICs until sales from the first generation happen. To get there, you have to survive. To do that you need a low burn rate. Bye bye ASIC team.
Board guys are in a better position, as are software guys, but it's not uncommon for a large software team to be slashed once the product hits Beta.
It's just business. VCs aren't charities. They're in it for the money, and the Board will take the steps to get that money. That's what THEY are paid for.
Oh, and by the way, all those engineers who actually built the product... their vested stock will be washed out at the next round. Sorry... thanks for playing.
Welcome to future. Those corporate 15% Stock Perchase Plan deals are looking better every day. It's a bad time to be in a startup.
I've not totally lost faith, but I've seen enough to think the situation stinks.
Marcus.
You think it is survival mode for the start-ups, how would you like to be a VC partner? You get paid according to how many boards you sit on, the size of the fund, etc. You probably gave yourself a big fat loan from the fund when it was established in 2000, and bought a big house in the high rent district, furnished it, twin Mercedes, fine wine collection, etc. All based on the earnings (aka successful exits) you projected. You made ten big investments and sat on five or six boards. Now 8 are DOA, never got the product out, and two got it out and qualified but are bleeding like crazy with little or no sales. You are down to one board seat, and the limiteds are screaming "make me some money!"
So you fire the founders, and hire the cheapest CEO you can find. He fires everyone else, and hires the cheapest people he can find. The he signs the company into a wash round so you as VC get 90% of the company stock, and with preferred conversion 99.999%.
It matters little if you screw up the company: just get runway and keep your management fee. There is no exit to plan for: just hope a miracle happens before the fund is depleted.
That's hard ball business reality folks. Don't take it personally.
-Why
Suppose that by some miracle the product that this company developed becomes successful. It now needs to produce a follow-on product or products to compete with the other companies that its success has attracted to the space. What does it have to meet this competition with? The answer is nothing. The skills that it paid so much to develop are now dispersed and no longer available to it. It now has to spend money and time to regenerate the enterprise knowledge that it has squandered. It is in the same position as its competitors and so will fail.
This is a strategy that embraces failure and rejects success.
This is not a new strategy. I have heard failing sales organizations using it in the past. Things would be so nice if they did not have to generate sales to support the R&D overhead. Why don't we just contract out our design and eliminate this overhead. In the case that I experienced it was because the sales organization could not generate sales and were so frightened of a salesmen founder that nobody could tell him the truth. To reinforce this, one VP who tried to tell him the truth about his disorganized system was fired within a week.
http://www.stockcharts.com/cha...
-Why
Procket has a router now, whoop-dee-doo. They need a LOT more than that to compete with Juniper and Cisco, it took Juniper years to get to the feature set they have now and it will take Procket years to have the same breadth of product. Or do we really think Procket can make lots of money on a plain vanilla router that's simply faster? If they start firing engineers now, it will take them that much longer to catch up.