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How startups should handle the downturn – TechCrunch

The crisis of 2022 is the third major technology downturn of the Internet age, following the dotcom bubble and the Great Recession.

There are plenty of experts out there offering advice to founders on how to weather this storm. While this advice is largely helpful, we must consider that approximately 14 years have passed since the last major correction, and few people in our industry have actively gone through a full business cycle. Therefore, it is important to remember that good advice is personalized, specific and, most importantly, contextual.

Every business is unique and faces different circumstances. Does a downturn affect all businesses equally? No. Do some companies have better balance sheets than others? Yes. Are some companies able to raise funds even in difficult circumstances? Absolutely.

The best advice for dealing with the slowdown should be based on the length of your track and the efficiency of your business. The lead falls into one of three categories:

  • Two years or more;
  • Between one and two years;
  • A year or less.

The corresponding strategy for each would be, respectively, “stay aggressive”, “prioritize ruthlessly” and “time to cut”.

Editor’s note: TechCrunch+ has notes from an interview with the author of this letter, Mike Volpi — including the potentially good news it contains for many startups — coming soon. The following letter has been slightly edited and reformatted for our pages.

Great companies are born in difficult times

Great companies were created and thrived during some of the toughest times. Famously, Google raised capital in the wake of the dotcom bubble, grew during the recession and was able to stand out from the competition. Salesforce, founded shortly before the 2001 crash, weathered the storm well, even though it nearly went bankrupt in its early days. More recently, Uber experienced a similar rise during the Great Recession.

Turbulence requires a different set of skills from founders. The era of “growth at all costs” is over. Today’s environment demands subtle and precise control and management of the business. When carefully navigated, these periods can separate the wheat from the chaff.

The first step to navigating rough waters is to do a cold and rigorous assessment of your business:

  • How much cash trail do you have?
  • Do you have the proverbial product-market fit?
  • Is your growth strategy effective in terms of cash?
  • Have you assessed and prioritized your engineering projects and marketing programs?
  • What is your competition doing?

If you have more than two years of track, stay aggressive


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