What happens to startups during a downturn?
While downturns aren’t always bad news, you’ll want to do everything you can to maintain momentum. Remembering that this, too, must pass, here are some recommendations for surviving and thriving as a startup:
Reduce your burn time.
In this type of frigid fundraising environment, startups should aim for at least 12 months, preferably 24 months, of runway.
Make use of conservative math.
Assume that revenue will be smaller than in your previous strategy. If you want to reduce your burn, you need also consider the revenue side of the equation, which is also likely to fall. As a result, your cost side may need to be reduced more than you anticipated.
First, cut non-people expenses. Software, real estate, bonuses, marketing expenses, or non-necessities are examples of expenses.
Once, headcount should be reduced. Multiple rounds of layoffs are detrimental to corporate morale and can leave employees uneasy or furious. If you must make cuts, consider this as an opportunity to get rid of underperformers. While it’s an unfortunate and tough thing to do, keep compassion in mind.
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