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Don’t Wait to Cut Costs, Adviser Warns Tech CEOs

Business adviser and turnaround specialist Peter Shaw of Shaw Management Advisers has some advice for tech company CEOs in the current meltdown: Don’t wait to cut costs.

“All too often companies wait too long to seek help or take drastic action,” he said. “Now is the time where companies need to be cutting back. If they wait until they have 30 days or 60 days of cash left, it’s generally too late. Companies should be battening down the hatches now, anticipating a long, long storm.”

Shaw, who has started and sold three tech companies and serves on two dozen boards, was a recent participant with three other successful entrepreneurs at “Failure Is an Option,” sponsored by MIT Enterprise Forum at the Salk Institute. The discussion, moderated by radio talk show host and entrepreneur Neil Senturia, examined the role of failures for entrepreneurs.

The “f-word” isn’t pretty, but most entrepreneurs grapple with it at one time or another, Shaw said by telephone last week.

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“What good management needs to do is understand there has been a change in the world, a significant change, and managers need to make changes to operate in the world as it is today, not three to five months ago,” he said. “One of the signs of good management is to adapt, and adapt quickly.”

Shaw was CEO of Ikonix, a venture-backed software company acquired in August. He’s a partner at Windward Ventures, a local venture capital firm. And he often coaches investors, boards of directors and executives.

“What folks need to do now is figure out how to survive on their own,” he said.

Venture capitalists are looking at their portfolios and determining who they will continue to fund. Entrepreneurs should expect more milestone requirements from investors. A $500,000 investment, for example, would likely be doled out in pieces rather than upfront.

Companies should stretch six to nine months of cash to one and a half to two years, or cut expenses to get to cash positive even if it means slowing growth.

Shaw said many CEOs are likely going through self-assessment, talking to investors and board members.

“I believe it’s always good to bring an outsider in. They typically see with clearer sets of lenses than the folks that are running the company,” he said.

“In some respects, the good companies in the good areas are going to be stronger because they have to be more efficient,” he said, throwing in a wine metaphor: “Real good (wine) grapes are grown in areas where there is little irrigation. It forces the roots to dig deeper.”

– – –

Low Rent, High-Tech: Construction is finishing up for Studio 15, a new high-tech, affordable housing project in East Village.

The $43.7 million project by Affirmed Housing, designed by Carrier Johnson, won a design excellence award last year from Multi-Housing News.

Its 275, energy-efficient studios include a kitchen, twin bed, desk and 26-inch flat-screen TV.

Solar rooftop panels will provide energy to the building.

The laundry room has a remote alert system for tenants when their clothes are done to save elevator energy costs.

The common lounge room features a theater system and 52-inch plasma TV, caf & #233; with wireless Internet connection, commercial kitchen and underground parking.

Rent ranges from $553 to $829. Units will be available to residents earning 40 percent to 60 percent of the average median income, which ranges from $50,450 for a single person to $72,100 for a family of four.

The building, located at Imperial Avenue and 15th Street, is slated for completion in March 2009.

Funding sources for the project include: Citibank, Boston Capital and the Centre City Development Corp. of San Diego. Allgire General Contractors of Carlsbad is provided contracting services.

Affirmed Housing Group is a for-profit developer specializing in affordable rental housing. Other partners include Housing Development Partners of San Diego, a nonprofit arm of the San Diego Housing Commission.

Send technology news items to Ned Randolph at nrandolph@sdbj.com.

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