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I just got off the phone with a bank that I work with on a number of companies we have an investment in. They are in the category of banks that aren’t really impacted (at least not yet) by the current incarnation of the credit crisis because of where in the banking layer they play.
One of the things that came up was how I feel the macroeconomic issues impact things with certain companies. I told them I have no real clue and am paying attention to sales trends, but that I’m not getting worked up about it. As I saw the Q3 performance numbers roll in for our portfolio companies they looked how I generally expected them to; some of our companies blew away their numbers on the upside (hard to do in Q3 since it’s later in the yearly budget cycle), some missed, and some came in around where we expected them to. There weren’t any huge surprises either direction since we are deeply involved in our companies and tend to have significant granularity on how they are doing.
In our call, I told the folks I was talking to that I think they are generally, along with several of their peers, in a great position in the current environment. When they asked me what I thought they should do differently, or what they should be careful not to do, I strongly suggested that they behave in the way they always have to their clients and VC partners – stay steady, transparent, clear, and direct.
I have a deep philosophy that the time to build trust is during turbulent, confusing, and uncertain times (aka "now"). If the bank stays steady and rational, they’ll earn a lot of trust and goodwill from me, their clients, and others that will pay dividends for a long time. If they start doing erratic things, like jacking companies around with harsh credit terms just because of fear on everyone’s part (and greed on theirs) they will trample good relationships and destroy long term goodwill.
I lived through this during the dotcom bubble. There are some VCs and bankers that I’ll never work with again due to their totally irrational behavior when the chips were down. Consistency of behavior and clarity of thought and purpose matters a lot all the time, but especially when things are confusing.
As we got off the phone, we all hypothesized that the root driver of all the noise (not the root cause of the problem, but the amplification of everything) is tightly coupled to the current US election cycle. I’ve heard this hypothesis from others and wonder how much truth there is to it. I’m not a political historian so I don’t have a long term view on this, but I sure do remember the "It’s the economy, stupid" for Bush vs. Clinton. Hmmm.