Thursday, January 29, 2015

Tales From the Silicon Valley Corridor

I had a chat the other evening with an executive at a fairly new firm, whose growth is exploding in the current boom environment. I am talking about super growth.

The firm just received hundreds of millions of dollars in a new round of funding.

Here is the thing: Although this firm does a great job in providing the service it does. They are extremely vulnerable to the boom-bust cycle.

I said to the exec, "You do realize that you are making long term 10 and 20 year commitments with suppliers to get your product, but that your clients are at the most committing to you for only six months, some even less?  Eighty percent of your clients are going to disappear in the next down phase of the business cycle  are you prepared for that?"

The exec responded, "Yeah, we know. We are trying to prepare the best we can." He shrugged and told me about 2 more locations that they are opening.


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