Today’s macro environment is challenging, with high inflation and rising interest rates creating economic uncertainty.
While the long term technology opportunity remains strong, the private tech industry is experiencing a ‘hangover’ from the past few years - which saw a large influx of capital, high valuations and a focus on growth at all costs.
Navigating this new environment raises many questions for founders and operators. To try and address some of the key challenges, we hosted a workshop for founders and teams planning for the year ahead.
Here, we share a few of the key learnings from the discussion.
With David Thevenon, Partner and Dave Kellogg, EIR at Balderton CapitalView presentation
With capital more scarce and expensive, fewer early growth deals are being done.
Isn’t there a record level of VC dry powder?
How can I stand out?
|YOY Growth||NRR (ENT/ SMB)||Magic Number||CAC Payback|
|$10-20M||138%||125% / 115%||0.95x||10 months|
|$20-50M||114%||125% / 115%||1.1x||11 months|
|$50-100||79%||125% / 115%||1.1x||14 months|
Capital has become more expensive. Therefore, founders will need to understand the best financing option(s) for their company. There are four main options: standard preferred equity, structured preferred equity, convertible debt, and non-convertible debt.
What should I do?
What if that’s not available or I don’t want to take a down round?
What about convertible debt?
Is venture debt something I should consider?
There are many areas to look at when extending your cash runway through operations, many of which are outlined in the slide below.
Before you make any structural or strategic changes, make sure you’re acting based on your leading indicators, and not just following the crowd. Focus on what’s happening right in front of you in your business, not what’s happening around you in the sector.
The question to consider here is: are you going to be able to raise money at some point on terms that you’re happy with? If the answer is yes, go and make that happen. If the answer is no, then you should likely focus on cash flow break even.
What if it’s more complex than that?
Surely there’s more to it than just the financing?
It is time to make the most of what your investor has to offer. The most important thing is to ask for specific advice - because every company, and every situation, is different.
Some of the ways investors can support you include:
Providing KPIs and Data: Investors should also have a lot of data points to share with you on your sector, to allow you to benchmark yourselves against others.
Connecting you to the community: Peers are a great resource for finding out how other businesses are responding to similar challenges, not just at CEO level but across all CXO positions.
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