During the dot-com boom, I thought I was invincible.
Back in the late ‘90s, I was a teenager with an online dating platform and a $13 million valuation. That’s too much money and ego for a kid. I remember having a conversation with my dad, who came to Canada as a refugee from Uganda, and scrimped and saved as a pharmacist his whole life. I told him he should “work smarter, not harder” like me.
It must have been karma that came for me weeks later when the bubble burst. All that paper wealth disappeared as our valuation plummeted.
These days, we’re back to high inflation, plunging markets and talks of an impending recession. For founders in their 20s and 30s who have never led companies through a recession, it’s going to be a shock to the system.
Funding may dry up. Valuations could plummet. Customers may drop you or your product. But — and here’s the critical thing — this doesn’t have to spell the end of your startup. Not by a longshot.
The post-'90s bust was my MBA from the school of hard knocks. It was painful at the time, but the lessons I learned then made me an exponentially smarter entrepreneur and investor. I owe what I’ve since achieved to that recession.
Take it from me: Don’t waste this moment. Recessions offer the best learning opportunities. Here are four tips to survive and emerge stronger.
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Founders, get your head in the game
First things first. Before you look at your business, do an internal audit of your own mindset. You’re not signing up for a bull market run; you’re signing up for a war that might take years to win. In the U.S., recessions last an average of 17 months, and we’re not even ready to use the R-word yet. The era of easy money is already over.
At the best of times, entrepreneurship has been compared to riding a lion: “How the hell did I get on this lion, and how do I keep from getting eaten?” The highs, lows and mental efforts are real. However, over the last decade or so, the rewards have been substantial and relatively easy to come by.
That’s not the case now. It’s going to be hard without the short-term returns. So ask yourself this: Is this hustle really for you? There’s no shame in getting out if you aren’t ready to lead through a crisis. One of the best ways to determine if you’re up for this is to locate your North Star.
Find your North Star — then plot your course
Too many entrepreneurs go into a reactive mode during a crisis — slashing teams and budgets in a knee-jerk fashion and racing from one fire to the next. Before any of that, take a deep breath. Decide where you want to be, not next month or next quarter, but in three to five years — that’s your North Star.
Then reverse-engineer a plan to get there. Focused on your future goal, identify what you may need. Plot out your key hires, acquisitions, product upgrades and a path to profitability.
Of course, you’ll encounter roadblocks along the way. Customers may not materialize and new products might fizzle. But without a clear destination, you won’t know how to allocate limited resources, and — more importantly — you won’t be able to muster the resolve for the hard times.
This kind of thinking is exactly what enabled so many great companies to take the offensive during past recessions, racing ahead while others assumed the fetal position. General Electric, IBM and Microsoft launched in recessions. Apple also had two substantial launches during recessions — first in that famous garage in 1975, then in 2001 with its hardware release, the iPod. A recession is a blip in time for those who see the bigger picture.
But what if your money is running out? Plan as far into the future as you can, and find more. This brings me to my next point.
When it comes to cash, hope is not a strategy
Sitting around and watching your runway dwindle, hoping that a big client or investor will finally return your emails is a recipe for failure. Instead, actively pursue every avenue you can to generate cash for your business, save money and stay in the game.
This starts with finding ways to bring revenue in the door immediately. Expand your target market; tweak your product line; adjust your pricing — in short, do what it takes.
Equally important is finding ways to do more with less. To save, exhaust government grants and benefits. Negotiate credit extensions with suppliers and vendors.
Maybe you need a loan or have to take a down round. Don’t get too fixated on valuations. Consider accepting less per share if needed in order to survive. You can recoup value in the next round and — needless to say — valuations are meaningless if your company ceases to exist.
When I think back to my early days as an entrepreneur and that “work smarter” moment with my dad, I cringe. My parents escaped a military coup in East Africa and have always hustled for us. What a stupid thing to say. I’m glad the karmic recession came for me. I deserved it, and I learned a lot.
Now, more than 20 years later and after working with more than 100 companies as a founder and investor, I can see the upside of downturns. Right now is a chance to clarify your vision, cement your team and build for the long haul.
Founders who find a way to survive the downturn will emerge stronger. It just requires seeing any bust for what it truly is: a masterclass in entrepreneurship.
Shafin Diamond Tejani is the founder and CEO of Victory Square Technologies, which supports technology startups through sustainable growth.
This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.