Building a startup at the end of the world

Founder Collective
4 min readMar 9, 2022


By Micah Rosenbloom

Despite a massive correction in tech stocks and the start of the first European war in decades, things still feel oddly normal in our world. While I’m not writing a RIP memo, I do think better safe than sorry. Let’s pray for peace, but here’s my advice in the meantime.

First, what we should expect if trends continue?

💸 Fundraising gets harder
📉 Valuations sink lower
🌠 Secondary sales get rarer
😶 More stress
🛑 Harder sales processes
🪑 Regretful losses
🔮 Unknown unknowns — Things could get really weird, really bad, really fast.

So how should founders and investors manage this uncertainty? Reactions vary widely depending on circumstances, but almost everyone will benefit from a proactive posture. Here’s what I recommend:

▶️ Reset expectations

Financings are still getting done at 2021 pricing, but that could change with a few bad news cycles.

Capital markets soften…then they seize up suddenly. Markets can be irrational on the way up and also on the way down.

Valuations could change, so be realistic about how much one raises and be sure to cast a wide net of prospective investors. Of course, the best way to hedge fundraising is to manage burn.

🎲 Be more conservative in your sales forecasts

A deal that had a 15% chance of falling through in 2021 now has a 40% chance. As a result, companies may pull back spending. Be more conservative on sales targets to set expectations internally and externally.

🧮 Know your numbers

I can’t overstate the importance of having strong financial reporting infrastructure/oversight. Founders should expect an increase in financial due diligence during fundraising. And if they can’t fundraise, good cash management is *critical.*

🕳️ Don’t let debt get you!

Many startups have debt funding but haven’t paid as close attention to covenants in a while. Be sure your finance team knows what can trip debt lines up. It also never hurts to have a plan to pay it down.

🥇 Raise your bar

Give poor performers fewer chances and increase your standards for hiring. It’s better to rightsize when all parties are still reasonably stable. Get into the lean mindset before lean times are thrust upon you.

✂️ Start trimming expenses

After selling our startup, the acquirer instilled a hiring and travel ban during the financial crisis. You don’t have to institute freezes, but as with staff, make sure every perk you’re offering is worth the expense.

🚪 Consider exits

The downturn in valuations might signal that founders/funders should prefer exits over markups. You don’t have to shop your startup actively, but don’t turn a blind eye to potential M&A from a cash-rich company that may be more acquisitive than usual.

💰 Keep your finest

Employees sitting on shares that may be underwater will be looking to cut their losses and join a company with runway and valuation headroom.

Don’t lose your best people — refresh options, bring forward pay increases, etc.

🗣️ Be honest

Don’t share every scary detail with your team — it’s your job to help insulate emotional swings — but you should talk frankly and honestly. People need to believe that their leaders can provide confident direction, especially in times of stress.

VCs offered similar advice at the start of COVID and ended up looking silly when tech and VC surged. Maybe that will be the case this time, and I sincerely hope so. But I wouldn’t count on it. This advice is always valid, even more so in times of stress.

Prepare for the worst while you hope for the best. If you make changes and the global political order stabilizes, you’ll likely enter a new bull run better prepared. Some of the best companies emerge during the worst of times.

Along the way, there may even be some *potential* advantages:

↘️ Competition lessens with fewer funded competitors
👋 Recruiting may get easier
🔐 Employees stick around longer
🤖 More hard tech and unusual things get funded

Unlike 2001 and 2008, our current downturn has been comparatively calm and orderly. Crypto markets have halved, and the major indexes have dropped by a quarter, but no one is panicking — outwardly — yet. Again, don’t expect that things will continue this way.

As David Frankel noted at the beginning of COVID, many of the best startups in history got going during economic ruin and war.

I believe things will get better over the long term, but have to manage the near term first. You’ll be stronger for it.



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