The bear market is roiling venture capital, but the people feeling the most pressure nowadays are founders and CEOs seeing their terms change, valuations shrink, and runways shorten. I recently spoke to a class of Kauffman Fellows about helping founders navigate crises, and here are my 7 recommendations to founders themselves.
- Tune out predictions of doom. It’s worth remembering that after Black Monday, in October 1987, when the Dow experienced its largest one-day percentage decline in history, pundits were eulogizing two struggling tech companies…named Microsoft and Apple. When the dot-com bubble burst in the early 2000s, serious people predicted the internet era was over. After the 2008 financial crisis, fintech was supposedly dead.
Instead of noise, focus on yourselves and your teams, as operators and individuals. Empathy cannot be underrated during a crisis, and this leads to my second point:
Remember that you care more than anyone. Never let anyone underestimate how much you’re connected to your mission. Your company embodies your life savings, family and friends and public reputation. No matter how hard investors work or how much they know, founders are more deeply connected to their companies than anyone else.
Take care of yourself, and your teams. Make managing your health – mental, emotional and physical – a priority. Taking even a few hours every week or two to get off social media and email can mitigate burnout. If you have to stay online, take a few minutes every day to decompress.
One of IVP’s portfolio companies, Thrive Global, calls these short breaks “resets;” its data shows even a 60-second break can help reduce cumulative stress and improves results.
- Use your investors as sounding boards, not magic 8 balls. No one has all the answers all the time. Recognize and appreciate investors’ honesty and humility, and the trust it builds, and demand it from those around your table.
As a founder, it’s okay to hear board members admit they haven’t previously seen a particular crisis situation and have their own fear and anxiety about it. Beware of board members who blindly apply lessons from the past. Advice combined with action is what you should screen for – anyone unwilling to proactively help is less likely to be a true partner to the company in the long term.
Ask for ultra-specific guidance. Everyone reads the same set of publicly available economic data. What you need as a leader are practical insights, such as how to manage working capital to pull in cash flow from enterprise customers without deeply discounting list prices.
Build reserves. Waste no time extending venture debt and credit lines, because if markets continue to decline, terms will degrade sooner than you expect. Flat is the new up for many companies, and I can’t recall many founders regretting raising turnkey extension rounds during the last crisis. One founder I work with closely asked about the optics of doing a flat round to an executive looking to join. My response: any executive who’s truly long-term focused would prefer more liquidity and runway than less!
Now is the time to be extraordinary. A crisis pushes exceptional founders to re-examine what they want to achieve and the depth of their conviction. I have seen founders cut their own pay, redistribute equity from themselves to their team members and double down on their belief just as many others are questioning theirs.
I saw one now-iconic founder handwrite thank you notes to each major enterprise customer who stayed with them during a difficult year. Actions and words matter!
Inspiration is all around you, so find your sources. I often turn to the final stanza of this Robert Frost poem – words as resonant today as they were in 1923:
The woods are lovely, dark and deep,
But I have promises to keep,
And miles to go before I sleep,
And miles to go before I sleep.