March 6, 2020 / 4:46 AM / 24 days ago

Leading venture capital firm Sequoia Capital warns of coronavirus "black swan"

SHANGHAI, March 6 (Reuters) - Sequoia Capital, one of the world’s top venture capital firms, sent a note to the founders and CEOs of its companies on Friday describing the coronavirus as “the black swan of 2020” and urging them to brace for coming economic shocks.

The note, which it also published publicly here said the companies should consider cutting expenses, reexamine their spending plans, review their staff numbers and prepare for a changing fundraising and sales environment.

Sequoia also said some companies had already seen growth rates drop sharply between December and February with several on track to miss first quarter targets thanks to the coronavirus.

The virus has hit the tech world in dramatic fashion over the past week, with an outbreak near the tech hub of Seattle killing 10 people and major companies including Amazon, Google and Facebook cancelling travel and urging some employees to work from home.

“Having weathered every business downturn for nearly fifty years, we’ve learned an important lesson — nobody ever regrets making fast and decisive adjustments to changing circumstances,” said the note, which was signed off by ‘Team Sequoia.’

“In downturns, revenue and cash levels always fall faster than expenses. In some ways, business mirrors biology. As Darwin surmised, those who survive ‘are not the strongest or the most intelligent, but the most adaptable to change.’”

Sequoia, an early investor in global tech behemoths like Google Inc and Apple Inc, has been known for its prescience in the past.

In 2008 it sent a similar note to its founders titled “RIP Good Times” during the global financial crisis of that year which has since become part of Silicon Valley lore.

The coronavirus, which is believed to have started in China’s Hubei province in December, has killed over 3,300 people globally. Reported cases of infection have topped 96,500, most of them in mainland China. But the number of new infections overseas now exceeds new cases in China, with Italy, South Korea and Iran in particular seeing worrying spreads of the virus.

In the U.S., new cases have emerged in Silicon Valley and New York in addition to Seattle, heightening concerns for tech firms. (Reporting by Brenda Goh; Editing by Simon Cameron-Moore)

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