‘Never waste a good crisis’: tips for tech survival

We can’t change what is happening in the markets. But the way we assess these challenges, adapt and turn things into opportunities is completely within our control.

Sadly, a lot of start-ups won’t make it out the other side of this market correction; however, history tells us that not only will many others survive, they’ll thrive by making the most of these times.

Companies including Airbnb, MYOB, and Uber were founded and built through recessions. The adage “never waste a good crisis” comes to mind, but as founders and executive leaders, how do we put this into practice.

Constraints unlock focus and creativity

What rides on the back of bulls?

Cowboys.

Amid the wild bull run we all enjoyed, there were no real constraints placed on the best companies. The “frothiness” of the market was driving questionable behaviour that most in our industry were guilty of at some level.

Capital was cheap, moods were high and companies were sprinting at dangerous speeds. Founders, VCs and boards over indexed for top-line growth, often at the detriment of cash runway and common sense.

Having minimal cash constraints inevitably reduced the focus and creativity of teams.

Now, with no easy funding around the corner, company leaders are asking more considered questions.

Such as: What projects in our product road map are the most useful to our customers and will, in turn, drive the maximum growth for us? Was it discounting that won us that big deal, or the new feature we shipped? Are these adjacent customer segments genuinely worth pursuing? Do we really need beer taps in our office?

Constraints are a beautiful thing when you remember what they can unlock. It’s easy to forget when you’re scaling a business that almost every start-up starts their journey with little to no cash, no credibility and a tiny team.

All they have is an idea, creativity and hard work, and there’s something magical about what happens at this stage.

As founders and managers navigating the challenges ahead, we need to strive to recreate this feeling and mindset across our teams. We’re moving into an era of doing more with less.

More sane talent markets

Soaring tech stocks had a direct impact on talent markets that were becoming increasingly out of control.

The remote work movement, accelerated by the pandemic, made this even harder for start-ups. In Australia, we were waging war on a global battlefield, competing for talent against such giants as Google or scale-ups jacked full of cash.

This meant offers and incentives were getting out of control, adding even more cash burn to an industry that was already spending at silly rates.

It is critical now that tech companies are hyper conservative on any short-term hiring plans, which for many people managers has come as a relief. It provides time to focus on performance and strategy, thinking more long term, this market correction presents an opportunity to hire and retain world-class talent more sustainably.

Stronger revenue and margins

Massive, frequent funding rounds were fuelling discounted land grabs, the strategy amounting to little more than undercutting competitors and giving away the core product, with monetisation thought of as something to worry about down the track.

The pricing pressure this created was very real.

In our scale-up, Mr Yum, we’ve intentionally sold on value from day one. We set out to build the market leading product to avoid falling into a race to the bottom price trap.

Companies that overleveraged discounting instead of selling value are now being forced by the markets to shift gears quickly. This is no easy feat when you’re rushing to catch up on R&D while trying to transform your sales culture and go-to-market strategy concurrently.

Companies that survive and thrive through these times will come out the other end with stronger revenue, better margins and more M&A opportunities than you can poke a stick at.

The cream rises to the top

With froth levels so high, start-ups and scale-ups increased their headcount at a blistering pace over the past two years. Many have been hiring so fast they are unlikely to be fully aware of all the top performers and future leaders in their business.

Now is their moment to shine, and the best will stand out clearly.

Similarly, over recent years, it became increasingly difficult for VCs to pick winners.

Deals were closing faster than ever, hype and FOMO was getting in the way of due diligence. It was understandably difficult for investors to see the forest from the trees.

In the same way top talent will stand out during the challenges that lie ahead, those companies that play their cards right today will be the obvious choice for investors to back once the dust settles and markets recover.