To end 2022, we felt we owed our shareholders an explanation of how Yurtle views the current macro-economic context and its impact on our prospects and strategy. Somewhat optimistically we decided our LinkedIn following might be an interested audience.
In short, the current UK economic backdrop has not prompted a change in strategy for Yurtle. Having reviewed our strategy, we concluded it remains fit for purpose.?
The macro-economic risks we believe directly impact Yurtle
The elements of the macro context which most directly impact Yurtle are:?
- rising inflation and its impact on corporate purchasing power (e.g., employees pushing for increased wages),?
- general uncertainty around interest rates/economic growth and its impact on fundraising and corporate purchasing power (investors eager to let the dust settle before deploying dry powder accumulated over a decade of unprecedented fundraising levels), and?
- rising unemployment in certain sectors (e.g., tech) and a shift in power from employees to employers (i.e., weaker imperative to please employees).
The Employee Benefits (EB) macro context
- Rewards budgets maintained. Following 2023 planning, EB/HR managers report having the same level of discretionary budget for benefits next year as they did in 2022. Some financial sector corporates report higher budgets (presumably to lure the influx of tech talent following lay offs). This means Yurtle must, in most cases, make an argument for displacing existing benefits (as opposed to being in addition to)
- HR/EB managers flooded with options.?Venture capital funds have been very active in the EB space in recent years. This has created a noisy marketplace with lots of players competing for the same corporate budget. This has meant EB/HR managers have been pursued by zealous salespeople from benefits providers.?
Why Yurtle is well placed to thrive in the context above
Yurtle benefits from having a clear strategy for 2023, disqualifying any spend that does not directly contribute towards success. We are not drawn to vanity metrics around amount of money raised and number of employees hired. Our current runway gives us headway to make sensible decisions.?
Specifically, Yurtle stands to benefit from the following.
- Cheaper to buy benefits/Yurtle than increase real wages. As an employer, it's both cheaper and an easier way to cultivate employee goodwill to buy a targeted, thoughtful benefit than it is to try to raise wages in line with expected inflation. Rather than increase wages across the board by ~10% (expected inflation rates), it is much more economical to invest in benefits as a retention strategy
- Our specialised offering helps us differentiate in a context of “benefit displacement”. Generic offerings (e.g., discounts on electric vehicles) tend to get low take up rates by employees (making them susceptible to being cut). Specialised offering focus on generating meaningful employee value, driving up utilisation rates
- Caring and family wellness is the fastest rising EB theme. Fem-tech (fertility, menopause) products have been the dominant theme in the EB market in the last 24 months. We have now heard from corporates, and market experts that the focus has turned to family wellness and caregiving (the pull from our ageing demographic realities is inescapable)?
- Validated focus on EB consultants/distributors. We always banked on EB/HR managers turning to their consultants to decide how to spend their budget. The explosion of EB providers (given glut of VC capital) has meant corporates are even more reliant on consultants to separate signal from noise?
A final point to note is that VCs will come under increasing pressure from Limited Partners (this group finances VCs) and their own fund economics/mandate to deploy capital in 2023. Therefore, so long as Yurtle executes its plan effectively, we are optimistic about securing support from institutional investors as required.?
Our focus for 2023 continues to be
(1) Demonstrating Product-Market-Fit. In other words, show:?
- The market we say exists, exists… (product fit)
- … and that market wants to buy our product at the price we need to sell it at… (profitability path)
- … and we can supply our product at scale (product distribution channel fit)
(2) Create customer value?
- Evidence our product meaningfully alleviated caregiver burnout?
(3) Build the Yurtle team according to Yurtle cultural guiding principles
If you operate in the EB space or an adjacent market and would like to discuss any of the above, we are always open to meeting new people and perspectives.
Wishing everyone a fantastic festive period and end to 2022. Bring on 2023!
