Technology Startups quickly focus on Survival

The heady days of growth at all costs are over. Growing eyeballs, users, and subsidizing the user experiences are out. Investors, VCs, PE firms are no longer lining up to toss money at these startups. Preserving cash flow, sustaining business operations for 3 years without additional funding, tightening belts and losing those employee perks and benefits…hold on…let’s also let go a few of those employees we have…is all on the table.

What changed? The world went from 0% interest rates for ever to quickly approaching 4% and potentially going even higher. The world had forgotten what a hurdle rate is. Many recent tech graduates and founders probably never even heard of the term. Back in the days when banking was not a flashy business, there were no proprietary trading funds and banks simply took deposits and made loans, getting a business loan was not easy. One had to provide a business plan that would look to earn a higher rate than what the lender could make putting money in government bonds or a fixed deposit because that was the cost of using someone else’s money. To pay a risk premium for the PRIVILEDGE and not the RIGHT to source of funds. We all know what has happened in the last 14 years.

Making a profit, generating positive cash flows and investing sensibly are making a return. Can you turn into a cockroach and survive the next 3 years if the world goes into a recession?