Do What’s Right.

Founder’s Getting Ahead of the Shift In Economics

Founders… Many of you are crushing it, and we see you.

“… Come on. Is it worth it? Well then work it. Put that thang down, flip it and reverse it”

Of course I’m pulling from the immortal words of the Songwriter’s Hall of Fame member Missy Elliott. The answer is ‘YES’, your business and dream are worth it, so it’s time to work on a new plan that gets you through this economic downturn. You have to put down the plan that was written for navigating smooth waters, and write a new plan for navigating far rougher economic waters. Founders in our portfolio have begun course correction, and while these things may be obvious, they deserve acknowledgment and to repetitious discussion. As a coach, part of my role is to champion what is working, and cross pollinate that throughout our portfolio. This article highlights a few things we see being done well.

Clear and Open Communication

In times of uncertainty, overcommunication is key. Many of our founders have had town townhall style meetings with their teams. Instead of doing the re-adjustments in a vacuum, they have had open discussions about scaling down. Some have even opened up lines of communication to allow the team to brainstorm ways to cut costs and not sacrifice quality and progress. It has shown the teams that they are all part of something bigger and that their voice, perspective, and concerns are all being weighed in the decisions that have to be made at each company.

RUNWAY — RUNWAY — RUNWAY

All of the above is geared towards the outcome of extending runway. The reality of valuations decreasing and capital raises becoming a more rigorous process have our founders seeking 18, 24, and in some cases 36 months of runway. We are seeing costs cut in meaningful ways — in a number of cases starting with some executive pay. One founder began with a “leaders go first” mentality and cut out expenses and pay that were for their lifestyle. The founder felt it was a moral imperative to do so before cutting into the payroll of their team. According to this founder, everything counts, from getting rid of delivered water tanks and putting filtration on the sinks, ditching the coffee service to the hard choice of reducing unnecessary staff. Yes, the hard conversation has to happen — in downturns there is a likelihood that teams will shrink. No one wants this, and yet to maintain core producers and keep the team focused with resources to succeed, sometimes it means that the support staff have to be reduced.

On this point, it’s also about the behaviors associated with caring for that runway. Monthly meetings for adjustments and reporting have become weekly in many companies so that they can course correct faster in times of need. Many of the founders are reaching out and asking for a second look to clarify and verify that what they are seeing is what we are seeing. This type of collaboration and transparency is helpful for both sides to plan for the future successfully.

One founder took advantage of the upmarket prices in the automotive industry. He calculated the cost of using Uber and sometimes an electric scooter for the short distance he travels to the office, versus keeping his SUV. His choice was to sell the SUV and not only bank cash, but reduce his insurance, gas, and payments. In the end, he calculated an $18–20K annual savings plus he made roughly $10K selling the car. In his mind, that allowed him to retain an extremely valuable assistant that was crucial to the business, and felt it actually improved aspects of his lifestyle. The willingness here is the key point. As a founder, is your hunger and drive to see the business succeed worth YOU adjusting? Leaders go first, and Missy asks that important question… is it worth it?

The Dollars Are In the Details (Not the Devil)

For our founders who are going out to raise, we are seeing a refinement of everything. One thing being done right is sharing far more details to preemptively answer deeper questions and help investors by doing the work for them. Details make it easier, and let’s face it, faster to get to YES! Data rooms are being cleaned and simplified. Tech decks are becoming clearer, and more robust. Funding and financial data are more concise, and the story that is being woven into these is clearer and anticipates the questions that may come and answers them.

Some founders are not just using their refined resources to raise more dilutive capital. Many are simultaneously hunting for strategic partners and air cover that line them up for partnerships or acquisition plans that would make for meaningful and profitable exits if executed correctly. Others are lining up resources and helping in finding non-dilutive funds that make sense for their next phase. It’s about getting resourceful to fund the business — period.

Less Is More (Unless It’s Coffee)

We are seeing mature decisions being made in shelving side projects that just months ago seemed to make sense, and are now just not going to get to profitability soon enough to justify runway burn. They are being shelved until further notice. While some of these projects were shiny pennies and given resources as a “path to revenue” if the revenue isn’t going to make a meaningful impact, then keeping them just to claim “revenue” is a bad idea. The founders who are keeping the team focused on their adjusted benchmarks and goals, and communicating those adjustments upstream to the board and investors have been a delight to see happening, and many were expeditious about doing so and have expressed relief to be back to a solid focus.

I Am My Brother’s (or Sister’s) Keeper

A good number of our founders have been seeking peer-to-peer support from each other. This, more than anything, is the ONE THING that I see being a habit and practice to help the startup ecosystems thrive. From my years in coaching early-stage companies, I’ve noticed that leaders tend to silo and often only seek counsel from their investors (many times to show a measure of fealty and softly report on progress and issues.) It’s a healthy practice to seek the guidance of your investors, they believe in you. It is equally important to allow iron to sharpen iron and speak to other founders. Let’s face it. They are successfully navigating the same, or similar, issues and we are seeing so many of our founders doing this. Some are even asking for us to facilitate the connections. Of course, from a coaching perspective seeing the founders leaning in and using their executive coaching to tackle how to handle stress, communication, scaling, re-prioritizing, and team dynamics is encouraging. The portfolio support team at Prime Movers has been actively engaged to help winterize the businesses alongside the founders. Still — founder-to-founder communication and support is deeply valuable.

Our younger founders are really doing this right. We are often attracted to them because they bring a fresh perspective and new ideas, however many of them were in their early years of college during “The Great Recession.” Aside from a slip in 2016 and the Covid-19 pandemic, there hasn’t been a major economic downturn in their professional lives until now, and so they are coming in with very little lived historical context. Having some founders with historical references to lean on and learn from has been a blessing to them, and was noted by one of our founders who cold-called a more experienced founder in the portfolio specifically for advice on navigating turbulent economics for the first time.

Hopefully, these acknowledgments of what we see founders doing right are healthy reminders, as well as prompts, to act. Leaders can find themselves stuck in a cycle of seeing what they aren’t doing, or what they could have done, and spiral into a hard place by questioning themselves and their ability to make it through times like this. The question to ask is “what are you doing now to make this a winnable game, or at the very least to stay in the game?” If you’re looking at the scoreboard at halftime, the question then becomes, how will you choose to play the second half? If you are in the arena of business — how will you play the next few years, and what are you willing to do? Is it worth it? We all know the answer is YES, yes it is.

The late American general “Stormin’” Norman Schwarzkopf often referred to leadership as boiling down to two simple rules that he learned in his years of service. They were simply called Rule 13 and Rule 14.

Rule 13: When placed in command, take charge.

Rule 14 is the title of this Blog: Do what’s right.

We are happy to see our founders embracing both of these rules, especially Rule 14.

Michael Savage is Executive Coach and Partner at Prime Movers Lab. Follow me on LinkedIn.

Prime Movers Lab invests in breakthrough scientific startups founded by Prime Movers, the inventors who transform billions of lives. We invest in seed-stage companies reinventing energy, transportation, infrastructure, manufacturing, human augmentation and agriculture.

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