Insights for entrepreneurs amidst economic uncertainties - How startups can navigate today’s chaos

It’s been a sad and humbling few weeks for tech companies and their employees. As rising inflation, the war in Ukraine and economic uncertainties converge, startups are feeling the pressure, too. Valuations are down and new funding is scarce.?

Despite these uncertainties, it’s not all gloom and doom. To navigate this period, startups need a difficult, but necessary reset. As a business owner who has been through some challenging times myself, here are some practical tips and takeaways that I hope will help.

Move quickly to cut discretionary spending

Although obvious, this can be incredibly hard to do. But businesses must be single-minded and disciplined about bringing costs down. Whether that means pausing less-critical initiatives, cutting back on subscriptions, or freezing non-vital hiring? – companies must focus on saving and becoming profitable. The sooner a business makes these decisions, the leaner they get to?

to emerge out of this environment stronger.

Optimise office space?

Working from home is a blessing. At Sleek, despite having 100 employees in Singapore, we use a space for 30 people, and encourage colleagues to work from home, and even from anywhere, with our remote working policies. With flexible policies and an office roster system, you can opt for a smaller space where people can come together to connect and collaborate every now and then.?

Cut back on unnecessary subscriptions?

Subscription services are another hidden cost sucker, which is why I ensure that at Sleek, we have good control over how many users we have on each tool, and stay on top of onboarding and offboarding employees, as needed. Additionally, I prefer monthly plans versus annual ones so that we can move quickly to curb costs when needed. So even if I pay 20% more, I can sometimes achieve greater savings with the ability to unsubscribe at my discretion.

Keep an eye on salaries and talent?

During this time – and even beyond, It’s important to be thoughtful and intentional about salaries and talent. In my experience, top talent tend to prefer both equity and salary over a pure salary package, which helps to bring down expenses and is a great way to get around cash constraints. It's better to have fewer, but more capable people. It’s easy to get excited when we meet talented people, but being disciplined and knowing when to hire expensive talent will set your business apart.?

Double down on waste reduction

Finally, emphasize the need to build a sustainable culture from the get go. At Sleek, waste reduction is a collective responsibility, but as a leader I try to set an example. It can be simple things, like choosing not to fly business class or splurge on five-star hotel rooms in expensive cities when traveling for work.?

Defer fundraising or consider angel investors

The startup fundraising bonanza is over, for now. This is not to say you can’t raise any money – but with lower valuations, founders are better off deferring to a better time. However, if your business still needs the money, I’d recommend raising from angel investors, who are less rigid about valuations compared to institutional investors, which are strongly connected to public markets.

Pro tip: Consider alternatives?

Personally, this has worked well for Sleek during the height of the pandemic when we wanted to launch strategic projects. Through existing investors, who knew the business was doing well, we managed to raise more than $3 million, as opposed to having to pitch from scratch to people who had no insider knowledge.?

Another effective way to defer difficult discussions around valuation is through convertible notes.??

However, as with all fundraising opportunities, it comes with its own set of implications, which businesses should look out for – especially if they plan to raise additional equity in the future.?

In this environment, even with higher interest rates, debt? facilities are becoming increasingly attractive options, too. With less volatility compared to public equity markets, it’s a viable alternative to explore.?

Parting thoughts

As I write this, Meta has announced its decision to layoff 13% of its staff. These are incredibly uncertain times and employee morale everywhere is understandably low. As CEOs and founders, it’s important to be there and give visibility. The worst thing to do at this point is to be obscure and opaque. Acknowledge difficulties and call out problem areas, so that you can rally together as a team and solve them. The same holds true for when business is on an upswing and things start to improve.?

Finally, if you're a business that’s bucking the trend and is currently well-positioned for growth – now is the time to seek out talented people, who wouldn’t normally be available. My DMs are open to talented and creative people who want to make a difference, as Sleek is hiring talents for our growth journey.?

#entrepreneurs #startups #founders