The old systems of expecting founders to quit their day job to support their concept development might need to go in the bin
The tech industry was always going to burst at some point – every area of innovation will grow, maximise, blow up and level out.
That’s the way of the world. However, place a global recession in the mix with rising interest rates and cashflow slowing down, and all of the smaller firms or businesses who don’t keep cash in the bank will suffer.
People who have spent their money poorly will wish that they hadn’t. These are all factors in leading a company that in time would have weeded out the wheat from the chaff, a recession simply accelerates that process.
Develop a military mindset
I always think back to a conversation I had with two members of the military in a local pub. It was an SBS guy from the UK and a Delta guy from America. They were comparing the amount of technology they were given to use during their initial training.
The Americans were given access to the latest and greatest, whereas in the SAS selection they’re deliberately given next to nothing, the bare minimum to survive. Why? Because it makes you alert, it makes you keen, hungry and most importantly, tenacious.
You have to think of ways around issues in order to survive. With business that’s all about rethinking methods of communicating to your marketplace, assessing what needs your investors and buyers have now and changing the methods of working with them to make you the most powerful, amenable option.
Industry is already adapting fast
Periods of change in the industry intrigue me. Because I know there’s going to be so many differing opinions on new ways to handle it. People will still invest funds if there’s a tax benefit to it – either a tax write off or a tax advantage. However, now we’re seeing companies move into smaller fund investment via AI-driven algorithms which weigh up the founder’s attributes as part of a scorecard. If they get the right score, they get the money. If you’re an investor, you need to spread your money across different asset classes to minimise your risk and hedge your investments. I think we’ll see a lot more of that.
There’s always opportunity out there
Some people made a vast amount of money during the COVID-19 pandemic. Ensuring that your data points are collecting information on the right KPIs and you’re tracking your consumer habits closely and on a regular basis will be key to knowing how and when to adapt.
You need to move your thinking from checking reports every month too. Check them daily if needed to monitor marketing success and comms.
‘Don’t be so comfortable in your job that you miss bigger opportunities’
Body language and the art of deception
So the founder’s acumen is always more important than their idea: how someone copes under pressure is always something we check for before investing in a founder.
Our system of questioning and evidence is honed now and I’m relieved because I think a lot of people are going to be desperate for money and potentially not being truthful about their intentions. Checking tells and body language is going to be an extra skill when strength checking ideas at the pre-seed and seed stage.
Due diligence always needs to be paramount for any investor however I do feel that with a recession the need for it rises. The old systems of expecting founders to quit their day job to support their concept development might need to go in the bin. Actually, if they have a source of income to tide them over, that would reduce their stress and actually give them the breathing space to be creative.
Cash in the bank
When payment systems slow down within supply chains during a recession, the one element that will always tide businesses over is having cash in the bank.
We tell all of our Startup Giants founders that and really push them to make sure they’re justifying every company purchase.