Foreword from Kaushik Subramanian, Partner at EQT Ventures

After more than a decade’s boom period of easy credit, widespread growth and consumer confidence, founders are now facing a radically different commercial environment. With less leeway for errors and more pressure to perform, the decisions businesses make today come with more weight, and risk, than ever.

To understand the path forward, we turned to those who have made the journey before, as well as some of the leaders in today’s technology scene who are navigating these challenges in real time at our EQT Ventures x Stripe event in London. Our panel included Polly Barnes and Martin Eriksson, Operating Partners at EQT Ventures, Barney Hussey-Yeo, Founder and CEO at Cleo, and Jurgen Van Gael, CTO at Stripe UK. Together, they bring together a wide variety of experience from diverse industries, economic climates and positions in the technology ecosystem, as we discussed how founders can make every decision matter when the chips, and the economy, are down.

Work with the market you have, not the one you want

Balancing consistency and agility is a constant challenge for founders. After all, one of the main advantages of startups when compared to incumbents is the ability to spin on a dime when the opportunity presents itself. However, there’s a difference between being adaptable and losing focus.

“The temptation I’ve seen in multiple services in my career is to just keep doing everything that you’re doing and to ignore other stuff that you might have to do because the markets change.” says Martin. “It starts with taking a step back to really focus on your strategy. Focus on what you do need to deliver, and then get the team aligned around this goal.”

When the situation is uncertain, leaders need to project stability for those who rely on them. “A lot of founding teams set strategy, and then we love to change and pivot,” explains Polly. “But the result is then that the strategy is not consistently being delivered, and teams smell that and that becomes a concern. You have to hold yourself accountable to actually living and breathing that new direction so people get it.”

The power of radical transparency

Making, sharing and implementing requires a level of conviction and commitment, but also a degree of transparency that can seem antithetical to some leaders. After all, no one wants to instil panic in their team by admitting that times are tough. But without honesty, there’s a high probability your plans won’t achieve their goals.

“My biggest takeaway from challenging times is that you absolutely should tell people, and even if things are going badly,” says Barney. “Magic happens cumulatively. If you tell people what the problems are, they can help you to fix them.”

For some, this will echo the experience of Covid-19 — the last time most businesses saw their plans thrown into disarray. Now it will be those who learned the right lessons from the pandemic who will have the chance to adapt faster to a tighter, more competitive market. Martin spent the pandemic on the frontlines of Mind the Product, facing a global crunch in in-person events. “We were super transparent about capital in the bank, what was happening, what we were focused on and what bets we were making,” he says.

“We had to furlough people, but we kept them in the loop, with updates and all hands meetings. And in time we managed to bring the whole team back but it took three or four months. But it was that radical transparency that gained us the forgiveness we needed to do it.”

Adjusting your strategy for new times

When it comes to deciding what to continue, what to pause and where to innovate, restrategising can mean making tough, even painful decisions. The first step of any strategy is to protect your position — that means retention and consolidation. “We start with talking to primary users to get a sense check of their priorities and figure out what’s going to continue to drive their business, which ultimately is going to drive our business.” says Jurgen.

“The second thing is to balance longer term goals and short term interests. There are some projects we push back, reprioritise or even throw out. Then it’s about having an open conversation and building that into your new roadmap.” he says.

Of course, if you’ve been keeping an eye on the ball, your new planning may not need to be a complete about turn. The regularity of market-shifting events in recent years has put more pressure on founders to be adaptable, preparing for black swan events as a matter of course.

“You should always be thinking about what might change, stress testing for different circumstances.” says Martin. “I think some of the companies that we’ve seen fail over the last two years were very clearly not doing any scenario planning — everything was going fine until it wasn’t.”

Making the most of your team

Uncertainty can feel like a tremor for startup teams, where talent joins with high hopes of advancement, remuneration and IPOs, all of which can feel at risk when the market slows down. But if your business is going to make it through a turbulent period, retaining your top talent is a key concern.

When budgets get tight, salaries and bonuses can be an early target for cutting back, but founders should be aware that while the business may be struggling, so too are their teams. “Benchmarking really is the secret sauce that very few people get to at an early stage and it’s absolutely critical right now, because the majority of startups that I see are still paying pretty well, but it doesn’t feel like that.” says Polly.

The key is to focus on what works for the business and your employees — when the future is uncertain, traditional incentives such as equity may not feel as valuable, likewise long term salary plans. “When it comes to aligning budgets with outputs, consider performance-based incentives, such as spot bonuses or achievement-based equity.” says Polly.

Every company is an AI company

Even as the global economy slows, one sector shows no signs of abating — AI. The advent of various co-pilots and assistants raises the possibility of widespread productivity gains and a newly enabled workforce. But can founders really count on AI to save the day?

“I think every company now has to think about themself as an AI company. It’s changed your market, your business and if you’re not thinking about how it might be impacting you then somebody else is, and they will probably out compete you.” says Martin, bluntly. “These tools can make you more efficient, offer better customer service and help you save those costs you’re trying to save now,” he says.

Cleo, in their mission to be the leading AI financial assistant, have been adopters of AI since before it was cool, so Barney is appropriately bullish on the idea. “It’s the biggest platform shift we’re gonna see in our lifetimes by far. Just like we moved from PC to internet to mobile, it’s going to change everything fundamentally. I would invest hugely in this and spend a lot of space and time looking at it.” says Barney.

Take a realistic view of growth and resilience

Businesses who are VC-backed don’t just get to take a holiday from growth. The commercial reality is that, even when the market shifts, the need to acquire market share and demonstrate engagement with your audience remains. The goal for leaders is to balance those needs while supporting their teams with the new reality of the market.

This is especially challenging for startups, where earlier fundraising and planning is based on a now-outdated view of the market. “I think it’s very naive for a startup to think that you can pursue the growth curve that you drew on a deck two years ago when the whole world is changing.” says Martin.

“You have to take a step back and see what is a realistic number and have a very honest conversation with your board. You need to focus on how to set those expectations, what you have to hit to reach the next round of funding. You might have to focus on one thing, be it revenue retention, and not focus on other things.” he says. “Whatever that conversation is — have it now, not when you run out of cash”.

Building a resilient business means focusing on the metrics that can keep you and your team moving long enough to either ride out a tough patch, build capacity and advantage for a changing field or find opportunities to pivot.