Cash is Going to Be King Again, Soon

By David Frankel

Does your startup have an impressive cash stockpile? If so, the following will soon be plentiful:

⭐️ Talent

🥊 Competitors looking for soft landings

📣 Affordable customer acquisition

Are you ready to take advantage of this moment?

A few thoughts on how to prepare:

This advice is primarily meant for companies who have a multi-year capital cushion and can make fairly reliable projections about future cash flows.

If you have <two years of reserves, there are probably better threads to help navigate the current market uncertainty.

⚕️ First, do no harm.

You are in an enviable position, likely because you have managed your resources responsibly.

After years of losing good talent to outrageous offers from competitors and keeping your acquisition costs low, the desire to splurge is understandable.

Instead: Try to keep your head about you.

Use this time to make a list of your key needs and keep hiring managers focused on those roles.

There may be opportunities to snag superstars. That always makes sense and now you have the resources to do just that.

🗺️ Reassess the competitive landscape

Are there channels you’ve back-burnered because of acquisition costs that you should reconsider in the face of dropping prices?

Teams you’ve left thin due to budgeting?

A tanking market can provide a clean slate for the well-prepared.

And I’m hoping that you’re one of those.

It’s easy to go on entrepreneurial auto-pilot and focus on the day’s hair-on-fire challenge. However, when the world changes, your plans should as well.

Convene your executive team and look at the opportunities that present themselves with fresh eyes.

💰 Make sure you’re getting value

Companies in the growth stage will have opportunities to buy competitors for what seem like bargain prices. Be extremely careful here.

Make sure there is talent and value alignment before acquiring a fully-formed culture.

Is this company in the position to be acquired because they failed to ship? Were they profligate spenders? If so, is that the kind of DNA you want to absorb? How many people do you really need?

🧠 Thinking strategically > opportunistically

For instance, instead of buying a competitor for a song, would it be better to try and win their customers via a surge in ad spend?

There may be too-good-to-refuse offers, but some you should pass by.

Shepherd your hard-earned currency (stock or cash).

Don’t overpay for mid-tier teams.

Don’t succumb to the temptation to overpay for a former competitor.

The instincts that put you in this position have served you well.

Be highly cautious about significant swings in behavior.

⏳ Play the long game

It’s unclear how long this market correction will last.

But, as good as the opportunities you see after six months may look, waiting a year may prove even more rewarding.

Your capital is a treasure, but patience is a virtue.

Timing the market is tricky, but you don’t need to be blessed with the gift of prophecy to see where things are headed.

Public markets have been routed with more distance, and venture markets are slowly following suit.

The key questions are “how bad?” and “how long?”

While others go into panic mode, you can make great plays.

As others play defense, this period of upheaval could define your startup’s destiny for a decade.

Guard your treasure so you can seize the opportunities that will arise!

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Our mission is to be the most aligned VC for founders at seed. #ProudInvestor in @Uber @TheTradeDeskinc @Buzzfeed @Cruise @Diaandco @PillPack @SeatGeek & more.

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Our mission is to be the most aligned VC for founders at seed. #ProudInvestor in @Uber @TheTradeDeskinc @Buzzfeed @Cruise @Diaandco @PillPack @SeatGeek & more.

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