What's 🔥 in Enterprise IT/VC #288

Stay calm and carry on, growth at all costs is over, the prudent ones can keep building 🏗️

May 7

VC tweet after tweet this week is about the world ending now. My only advice is to stay calm. Focus on what you can control and not on what you can’t.

I’ve lived through some 🎥 like this before, and trust me, every movie is different.

Ed Sim @edsim

Too many VCs tweeting about the world falling apart and going into panic mode... Not enough rolling up sleeves and helping founders plan appropriately 🔑 is to make sure highs are never too high and lows never too low Stay calm, better decisions will be made

While this correction sucks and is painful, I also do hope some of the insanity out there will end - specifically the idea that growth at all costs is the only thing that matters. Call me old fashioned, but I’ve always tried to preach fundamentals, balanced growth, and here are a couple practical ways to think about it.

Seed startups - only spend on product/eng - do not prematurely scale until you have product market fit - no change should be necessary in an up or down market if that is how you’ve built your business. If you need more runway, get it fast via extension from existing investors.
Late stage growth startups - keep spending on growth if the sales efficiency and CAC is there. Yes, the overall multiples for your business have changed, but you can’t control it. If you are hell bent on spending more and more💰, take a look at a simple ratio - $ spent for each new $ of ARR and make sure that improves YoY. If you’ve been sensible all along, then you shouldn’t have to tweak too much as you’ve already laid out your 3 plans, upside, base, and lower plans. Pulling in profitability in this market for the late stage companies will be more rewarded in the future.
Tweeners - folks who raised massive preemptive A or B rounds, be honest with yourself and ask if you have true PMF. I can’t tell you how many times I’ve seen founders raise boatloads of 💰 and with the high expectations prematurely scale their sales teams when they still don’t know who the target user or buyer is from the right target company. Insane - YES! But it happens more often than not. For these cos, this is where the truth hurts - hunker down, cut burn quickly and buy more time.
Ed Sim @edsim
💰 is 👑 If you have it, preserve it All of those founders who raised mega Series A + B rounds will have to show more progress than before just to reach valuation parity, let alone exceed the last round Make sure you have enough runway + then some
April 27th 2022
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If you have been thinking like this all along, particularly for companies in buckets 1 and 2, you should be quite calm and ready to keep hiring talent as the companies who didn’t build prudently are going to feel some major pain. Remember, the highs should never be too high as you should be thinking on how things can turn badly in an instant. The lows should never be too low because frankly startups are F$%!ING HARD, especially for new categories so folks need to keep the faith. Your investors should also know when to cheer (when things are shitty), to challenge (when things are going 🚀), and to chill (sometimes founders need to figure things out on their own).

Once you get through this, remember to keep a balance approach at all times and you’ll be ready for what’s next. IMO, this too shall pass but may take a few quarters.

Jon Erlichman @JonErlichman

Stock declines from the peak of the dot com bubble to the bottom: Adobe: -56% Microsoft: -56% Amazon: -75% Nvidia: -75% Apple: -78% Stock gains over the next 19 years: Apple: +58,746% Nvidia: +33,818% Amazon: +19,405% Adobe: +6,250% Microsoft: +1,240%

IT Spending continues to 📈, move to ☁️ has more room to grow, and we are so early in crypto with 🌊 of 💰 waiting to pour in and burning needs for better security, infrastructure, and tooling to support. Founders keep building 🏗️ but prudently.

As always, 🙏🏼 for reading and please share with your friends and colleagues. Also, Happy Mother’s Day to all the wonderful mothers in our lives!

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