AUGUST - 20238GOVERNMENT CIO OUTLOOKIN MYOPINIONPhil Nadel, Co-Founder and Managing Director, Forefront Venture PartnersA12 ACTION STEPS STARTUPS MUST TAKE TO SURVIVE AND THRIVE s a startup founder, you are no stranger to the challenging fundraising climate in which we currently find ourselves. Reduced valuations, smaller funding rounds, less capital available, and a greater focus on profitability are all symptoms of the current environment. These market conditions, combined with recessionary economic conditions, have forced many companies to focus on their cash burn and runway -- and this is a good thing. Market environments featuring high valuations grab all the headlines, but they are not sustainable in the long run, especially when they are not correlated with public market valuations and multiples. The pendulum has swung and it's refreshing to see that a company's ability to be capital efficient is now a more sought-after and rewarded characteristic than the grow-at-all costs mentality that has been so prevalent in recent years. The market has also caused a much-needed reassessment of startup valuations. The balance of 2023, and perhaps beyond, will likely remain challenging from a funding and macroeconomic perspective. The market will continue to be cautious, and capital will be deployed at a slower pace. Many VCs will prioritize reinvesting in their already existing portfolio companies over making new investments. This will add downward pressure on valuations but will ultimately result in return to a healthier environment where great companies get funded and mediocre companies do not. Great companies frequently emerge and grow during challenging economic periods. Square, Uber, and Airbnb were founded in 2008 and 2009, during the Great Recession. Apple, Microsoft, and Oracle were founded in the wake of the mid-1970s recession. So, what should startup founders do now to emerge even stronger from the current economic and fundraising challenges and set their companies up for success? To paraphrase Ben Alldis, one of my favorite Peloton instructors, use this as an opportunity to build a stronger, better, fitter, and healthier version of your company. Embrace resilience and scrappiness. Here are 12 action steps that startup founders should take to help their companies survive and thrive during this challenging period: 1. Focus on minimizing cash burn in order to extend runway. If you run out of cash, nothing else matters. 2. You will likely need to reduce your staff since this is usually a company's largest expense category. Aim to build a team of all-stars and not settle for employees who are less than stellar. With many layoffs occurring at tech companies, you may even look to replace certain sub-par members of your team with all-stars who have been laid off by competitors. It is important to focus on employee morale as layoffs will cause feelings of anxiety and fear among the remaining staff. Communicate with your team. Keep them informed about the state of the business and any changes that may be coming. This will help build trust and keep everyone on the same page. 3. Make sure you understand your key performance indicators, especially customer acquisition cost (CAC), lifetime value, and CAC payback period. Once you're sure these are dialed in, focus on reducing all inefficient customer acquisition channels. You may need to rethink your go-to-market strategy. The way you market and sell your product By
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