VC Office Hours: Staying Strong in the Downturn
How can startups best position themselves to thrive amidst the economic slowdown? Tune into this conversation with our panel of VCs including Foundation Capital's Joanne Chen, Scale Venture Partners's Noah Gross, Mastry Ventures's Fatima Husain, and finance expert Mika Kasumov to hear their insights.
- Now is a fantastic time to raise capital. Despite the macroeconomic climate, if your company is performing well, there is "dry powder" in the ecosystem. The discipline needed to exercise tighter budgets and leaner teams can benefit early stage startups who demonstrate product-market fit.
- What are expectations for revenue growth? There's much less variability and we're getting to a point of more stability versus volatility. 2020 accelerated a lot of buying decisions for cybersecurity and collaboration. Today, there's more scrutiny on expenses and that creates a tailwind for companies who specialize in cost optimization, automation, and robotics. That said, now is more important than ever to focus on the ROI of your product.
- The best companies are placing their bets on the fundamentals, like margin profiles and getting closer to profitability. Growth matters and demonstrates product-market fit, but the retention of your clients is equally as important. You should also know your current cash position so that you're able to pivot and add extra resources if opportunities to do so arise.
- Now more than ever, Finance is playing a critical role in the business. Finance leaders serve as strategic advisors to their CEOs, ensure operational efficiency across their organizations, and liaise with the board and other stakeholders. CFOs can have a sizable impact as thought partners on product direction, partnership opportunities, and more.
- Understand what metrics the firms you're considering care about. For example, for Scale Venture Partners, topline growth and efficiency metrics matter, relative to peers. Mastry Ventures recognizes burn and ROI are also extremely important and that balancing between the two is a delicate exercise (e.g., team size, capability, and burn rate). Eighty percent of the companies that Foundation Capital invests in have no metrics at the time because they are pre-revenue, sometimes pre-product. However, they invest in teams and spend a lot of time understanding spaces and why a solution may be relevant today. So it's more about timing. They do a lot of work to help their companies graduate to the next stage of growth.
- Now is a great time to pick up top talent. Take advantage of fundraising in order to hire and build a team that can differentiate your company more easily from everyone else.