Following on from my post last week, I am staying positive and raitonale in the face of significant market headwinds for the tech and early stage sectors. That doesn’t mean I’m ignoring that it’s obviously harder to raise capital for many early stage companies today vs. six months ago and that, as a result, many early stage companies need to adapt to the prospect of not raising capital for some time and thus are having to lay-off staff (more here), or wind-down. Sometimes a downturn is necessary to sort luck from skill and to shine a light upon sustainable business models vs. those that have been riding the bull market chasing growth with unsustainable unit economics.
To founders, if you’ve got a great business model and you’re solving a real problem, keep grinding, hustling and doing whatever it takes to surive and thrive…down to the last minute. Explore every option and sometimes this may mean needing to swallow your pride in the short-term to keep yourself in the game for the long-term.
To investors, this is an incredible time to invest:
Some of the biggest tech companies today were founded through the GFC: AirbnB, Slack, Pinterest, Instagram, Square, Venmo, Asana and Tumblr to name a few.
Remember in the long term that founders need to be incentivsed by equity and so getting that extra good deal in the short-term may not be worth it in the long term.
Innovation can accelerate in a downturn and I’m looking forward to seeing new companies forming in the next 6-12 months and to see which founders hustle through the current period.
A call-out to the teams at Earlywork and Afterwork for launching Between Work, a resource for companies looking to hire laid off staff from tech companies. This is a great initiative. Hiring has been so hard over the last few years for tech companies, even those with great business models, and this initiative will help redirect great talent to great long-term sustainable companies.