Redpoint’s Geoff Yang Corrects Bloomberg Story (After I Ask Nosy Questions About It)

Earlier today, Bloomberg published a story about how Redpoint Ventures, which famously backed MySpace in 2005, is telling its startups to cut their staffs by 10 percent. The report said the firm “gave the job-cutting advice at a conference of its portfolio companies and limited partners last week,” citing Redpoint’s Geoff Yang as the source.

Considering that most firms had similar sit-downs with their portfolio companies beginning last October, I asked Yang tonight about the timing, as well as whether blanket advice to cut jobs couldn’t, in some cases, undermine the value of Redpoint’s portfolio companies.

He got back to me almost immediately via email.

”Just to be clear,” he wrote, “reducing burn rates when prudent and appropriate was a message we gave to our companies last fall. I just happened to speak to Bloomberg recently. I understand the
impression was that this was a new message, rather it was a message from early fall when it was becoming clear that we were operating in a new reality.”

Yang added that Bloomberg misrepresented how that message was delivered. “There was no email, mailing or general meeting to all of our companies. It was general advice given to our companies… to pare back burn rates to their most logical level, often as much as 10 percent.”

Addressing my question of whether that’s good counsel, particularly given how leanly many Web companies have been run (and praised for being run) in recent years, Yang told me that “decisions should be and were made on a company-by-company basis. For some very lean companies, there was no cutback and even in some cases continued hiring. For some companies where burn rate had grown in anticipation of growth, there were reductions exceeding 10 percent. There is no magic to a specific number. We did not send out a memo. Rather, each partner discussed and worked with each individual company to do the appropriate actions on a case-by-case basis. In several companies, no action was taken at all. In many cases, expense reduction actions were done by the management with no prodding from its investors.”

I also asked Yang to address another point made in the Bloomberg article, that Redpoint has been “reallocating money from the $400 million venture fund it raised in 2006” to focus it more on its existing portfolio. I wanted to know if that was accurate, and if the fund found itself doing more follow-on than new investing in the current climate.

Said Yang, “We have increased our reserve assumptions in light of the current financing environment, but we’re still aggressively investing in new companies and don’t expect our additional reserve assumption to have any impact on our new investment pace.”

He added that in the first quarter, Redpoint has already made three new investments, none of which have been announced yet.