Ongoing layoffs. Rumblings about a storm coming ahead with the IPO market at its worst. Trends like Canadian VC funding hitting an all-time high. Discussions of a potential recession. There’s understandably a lot of confusion. How do we make sense of it all? What does it take to be a successful company in this unpredictable market? How can companies prepare?
Retained Learnings reached out to a group of Canadian venture capitalists (VCs) for their expert insights on how founders and finance leaders can best navigate these questions. Here are some highlights from our interviews:
Tactics for finance leaders to empower their organizations
1. Don’t underestimate the power of focus
Eliminate the noise, reexamine what your company needs now to grow, and stay focused on the outcome.
“In challenging environments like these, a ruthless focus on the thing that matters most for the business is required to succeed. What is the one thing you need to get right in order to win? Apply all your resources and energy to that thing, and tune everything else out because it’s noise.”
Managing Partner, Leaders Fund
2. Make time your friend
Cash flow is always foundational, but in this market, it has taken on new meaning.
“Our advice to founders in this environment has two approaches. The first is to make time your friend by ensuring enough cash runway exists to enable businesses to succeed, and the second is more nuanced depending on the sector or company. In markets where growth is accelerating, we are telling our founders to seize the opportunity. In those cases where growth is slowing, we are asking them to focus on efficiency and finding gritty ways to grow. A one-size-fits all advice policy isn’t always appropriate. Your customers should be telling you how you are doing.”
Founder & Managing Partner, Framework Venture Partners
3. Lean into tailwinds, and be courageous about headwinds
Take stock of what opportunities can accelerate your growth or productivity. Make tough calls to reduce the impact of headwinds.
“If you provide your customers with real and immediate productivity tools or mission-critical applications, this investment may become a tailwind for your business. You will have opportunities to gain market share, innovate, and accelerate your growth. It is during recessions that Google and Facebook have emerged as leaders. So there! It’s not all bad news.
If you are in a tailwind situation, this is surely a good time to accelerate your product agenda, or even buy a competitor if you happen to be blessed with a sufficient pool of resources. Understanding your competitor’s cash and competitive position, as well as your own, will be more important than ever.
In contrast, if a recession sends headwinds your way, it is crucial for you to have the courage to recognize your position and make tough decisions. Only then will you buy the option to make it through to see the next up cycle.”
Partner, Inovia Capital
4. Run a tight ship
Understand that the details matter. Now is the time to be more intentional about the small details that have the potential to scale up.
“There’s a misconception about a trade-off that exists between focusing on growth at all costs, and profitable growth, because doing both a little bit often doesn’t work super well. You should always be steering a tight ship.
Consider every dollar spent as an experiment that requires justification for continued investment. Measure everything and you’ll know exactly where to double down. Is there low-hanging fruit optimizing conversion rates? Can you reduce customer acquisition costs (CAC) with viral product strategies? Lengthen long-term value (LTV) with customer success or re-engagement campaigns? How do you justify a new full-time salary?
Growth leadership during an economic downturn isn’t just about go-to-market, it’s a full-company effort. Capital is best raised if you know exactly how to spend it.”
Venture Capital Investor, StandUp Ventures
5. Find the middle ground between growth and profitability
Remember that success is a spectrum. Balanced thinking has the potential to be your company’s competitive advantage.
“You’re certainly not going to win in raising capital just by showing that you’re profitable but not growing. And then on the flip side now, I don’t think you can just be growing and not demonstrate some level of potential for a profitable, healthy unit economic business. So you have to find the middle ground of, you know, really strong growth and proof points around your unit economics. Now, this always depends on stage and the type of business, but it’s finding that middle ground.”
Focus on what you can control
As the saying goes, we can’t change the world around us — but we can take action to ensure that we are optimally prepared. Every business has its own unique story, and it’s up to finance leaders to support leadership in making the right judgment calls. Now more than ever, founders, executive teams, investors, and finance teams need to be working closely together to ensure the best possible outcomes for their organizations. The bottom line is to never underestimate the power of self-stability as a force of forward progress.