To the Founders Making Real Stuff that Truly Matters
Quick background: In the current environment, I’ve spoken with many founders of early-stage companies building the transformative businesses that will enable our better future. Often in “tough tech” areas, these companies do not get built overnight. After many of these lengthy chats, I thought I’d put my thinking down in writing and share in case helpful to anyone else.
Zen Shorts children’s book
Dear founder,
Several years ago, I discovered a children’s book titled Zen Shorts. I read it frequently to my kids to teach them valuable life lessons, but have secretly always thought they are perhaps even more important for us adults. Here is a very pertinent one for the current times:
An old farmer had worked his crops many years. One day his horse ran away. Upon hearing the news, his neighbors came to visit. “Such bad luck”, they said sympathetically.
“Maybe,” the farmer replied.
The next morning the horse returned, bringing with it three wild horses. “How wonderful”, the neighbors exclaimed.
“Maybe,” replied the old man.
The following day, his son tried to ride one of the untamed horses and broke his leg. The neighbors again came to offer their sympathy for what they called his “misfortune”.
“Maybe,” answered the farmer.
The day after, military officials came to the village to draft young men into the army. Seeing the son’s leg was broken, they passed him by. The neighbors congratulated the farmer on how well things turned out.
“Maybe,” said the farmer.
In the last few years of frothy financings and valuations, companies have taken advantage of capital availability to build. This is a good thing when it is put to good use. While it would be nice if human progress happened in a straight line, the reality is the peaks of the cycles are when we most finance innovation. In the excesses of froth, poor capital allocation may also accompany the smart capital, but in your case, tackling the challenges of building a sustainable and better future for humanity is imperative, no matter what GDP growth looks like or how the S&P 500 performs. The capital you have raised will be put to productive use for your startup and for society. As an additional benefit, if your product or service contributes to energy independence and decreased reliance on fossil fuels (which many of yours do), you are in a sector shielded from the current correction and especially given geopolitical changes may be meaningfully buttressed going forward. These corrections, however, do not mean that there is no need for more judicious capital deployment — the rules of the game may change a bit from what you may have been used to (especially for those of you who haven’t worked through prior downturns), but in the end the game will still favor the best companies working on valuable solutions to pressing challenges.
In these turbulent times, steadfast and calm leadership is at a heightened premium. Your commitment to your values and missions may be tested during the months ahead, as macroeconomic impacts ripple across different sectors. Be sure to remember that the people who best know how to run your businesses are you and your executive teams. Experienced and committed investors and advisors are here to support you as you assess how your business may need to adapt to navigate the changing landscape.
When others pursued rapid growth opportunities, you chose the harder path of bringing to market a tough technology that would take time to build but deliver major benefits to society in success. Given the current market correction, this puts you in a privileged position, especially if you have recently raised funds to cover the next 18+ months of execution. However, we all must recognize the macroeconomic impacts will ultimately ripple across all sectors of the economy, and each founding team will have to assess how its business may need to adapt to navigate the changing landscape.
What to do with these headwinds? There is no secret formula I know of, and each business faces its own unique set of challenges, but I offer a few generic thoughts for the times ahead:
Future financings may be tougher, but other aspects of the business (most significantly recruiting) may get easier. Marc Andreessen was right when he wrote “It’s time to build”.
Scenario planning and financial planning are more important than ever. Be proactive in thinking through the range of possible impacts to the business and how you would steer the ship through turbulent waters. Do not wait until it’s too late to make prudent protective decisions.
With capital at a premium, being efficient is critical. A dollar saved is a dollar earned. Prepare for potentially longer fundraising cycles, higher dilution, and plan to raise for a two-year runway. Having said that — stay the course. Investing in your team, your technology and your business is a good use of funds when it improves the outcome.
Do not forget to take advantage of the opportunity. While an ebbing tide brings everyone down, it also distinguishes the solid companies from the rest. Dislocation can open doors that were previously closed.
Avoid getting distracted by the noise. It’s important to be aware of reality, but also to disconnect from the endless chatter and focus on building the business.
Be a source of steady leadership. Know that your teams, for professional reasons and beyond, may need more frequent reminders that you are building something important and that together you will succeed. Communication remains essential, both internally (with your employees) and externally (with your investors and other partners).
While many in tech flocked over the last few years to building overnight successes with dubious value to society, you chose the tougher, longer road of building a real, defensible business that would improve the ability of humankind to thrive for generations to come. While I do not take any pleasure in seeing others’ (and my personal liquid portfolio’s) asset values decline, I hope you do share in the satisfaction of having the conviction validated that what matters most matters more than ever now.
The entrepreneurial path is a wild ride, and we may be entering a particularly challenging period. However, I have the utmost confidence in your ability to thrive in these times. And like the old farmer, perhaps these conditions will ultimately result in a better outcome for your business.
