Questions you should ask as the market melts down

By Micah Rosenbloom

Questions founders should ask as the market melts down:

⌛️ How long do you have?

✅ Do you have a plan?

🎭 Are you ready for a vibe shift?

🧯 Grow revenue or reduce burn?

👻 Is your revenue safe?

⚖️ Do you have the right team?

⌛️ How much capital do you have left?

Six months?

A year?

18–24 months?

This stage of the business cycle is not a time to cut it close — if you have less than a year of capital, start raising (and/or cutting) right now.

✅ Do you have a plan that takes market realities into account?

Rework your pitch, put it into a bulleted plan of action, and send it around to your VCs/team. Being proactive and showing that you recognize the market conditions (without paranoia) can instill confidence.

🎭 Are you ready for a vibe shift?

Your formerly highly engaged (and low attrition) team may feel defeated seeing their 401Ks and stock options de-valued all at once. Over-communicate, spend extra time with your team and lead by example.

You may also find that your “founder-friendly” board of directors asks more pointed questions and is less tolerant of misses.

Find an advisor who can give you friendly pushback on your deck and major updates before presenting them to your VCs.

🧯 Should you grow revenue or reduce burn?

It’s generally easier to control burn than to ramp up revenue. Don’t be afraid to make moves and keep looking for growth opportunities but make sure new hires are top-notch and necessary. If you have poor performers, take action.

👻 Is your revenue safe?

Big co’s are going to implement spending freezes. Per-user pricing is a bad fit in a time of widespread layoffs. Diversify and front-load revenue where possible. Offer discounts for multi-year contracts. Make sure CX is closely watching NPS.

⚖️ Do you have the right team?

Be ruthless in your talent assessment to give your core team as much runway as possible. If it’s going to take you six months to get someone up to speed and you only have nine months of capital left, cut ASAP.

🛒 Do you know your most likely buyers?

If not, now is a great time to start talking to people who could be potential acquirers and provide a soft landing. Don’t act desperate, but getting a sense of your options is never a bad idea — especially now.

Now is a critical moment to be more proactive about managing your VCs. Inside rounds often mean the difference between startup success and failure in down cycles. So here are a few questions you should be thinking about re: investor relations.

📉 Can you squeeze in some more capital on that not-too-distant last round?

We always want to raise at a higher and higher valuation, but in moments like this, spend less time obsessing over the price and more on shoring up your balance sheet with available capital.

If an existing VC or investor you couldn’t fit into the last round is willing to invest at the previous round’s price, consider reaching out to them and top off the round with a bit of cushion.

👏 Do your investors think about you a lot?

If you haven’t been in the habit of sending regular investor updates, now is an excellent time to start. You don’t want to be running out of cash in 12 months and have your investor not feel a sense of connection.

VCs will be busy triaging existing portfolios; they may not have time/interest to address your capital needs or engage on issues if they lack a sense of connection.

🛡️ Can you be a happy warrior?

Down cycles are brutal in many ways that are hard to explain. Do you have a personality type that can shield your team from the worst ups and downs? VCs and employees will favor founders who seem capable of handling tough times with a smile. Consider a coach or sounding board.

👀 Do you have a Board?

The problem with party rounds is that no one feels obligated to help clean up when the music stops. If you don’t yet have a VC who feels personally responsible for your success or failure, try to find one ASAP.

🙈 Are you paying attention?

Do you have a sense of the state of funding in your space? How do your metrics stack up against peers? I usually advise founders not to obsess over fundraising, but appearing in the know in these moments is helpful.

Hopefully, we’ll look back at this thread in six months and laugh at how misguidedly serious it seems. Many folks, me included, offered similar advice at the start of COVID, and a two-year boom followed our prognostications of doom.

That said, the financial capacity to make the money printer go BRRRR is largely exhausted. So a recession is basically required to get control over inflation. It’s been 13 years since our last major correction, and it feels overdue.

Many promising startups will face hard times. However, some things may get easier — recruiting/retention may not be as challenging, and customer acquisition should become less competitive — if you can stay alive.

I hope these questions help get you on that trajectory.

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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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