Navigating the Current Challenges and Opportunities

Date: 31st December 2023

Subject: Navigating the Current Challenges and Opportunities: A Letter from the Investor

Dear Founder,

I trust this letter finds you well as we reach the conclusion of the year 2023 amid the dynamic landscape we find ourselves navigating.

It has been close to two decades since the onset of the last significant economic downturn (The Great Recession) in late 2007. Despite temporary setbacks in 2016 and 2020, the tech industry has experienced relative stability since the Great Recession subsided in mid-2009.

For certain startup founders, CEOs, teams, and even venture capitalists, the current crisis in the tech world marks their first encounter with such challenges.

As Food Tech wave started, the market became accustomed to a positive and expansive outlook, characterized by investors embracing risk. The closure of funding opportunities and sudden change to a pessimistic investor outlook can be a jarring experience.

During the past year, I have been getting countless queries from worried founders looking for guidance in a sea of chaos and confusion.

As someone who appreciates the trials of the journey, I would like to share insights that have guided me through similar stormy seas in the two decades of investing in tech startups.

1. Cash Management and Financing Options: Scrutinize cash-burn models diligently in the face of low valuations. a) If sufficient cash is on hand, consider executing existing plans to validate your product or technology before raising additional funds. b) If cash is constrained, streamline operations and explore strategic investment trade-offs. Note: For companies with limited resources, alternative financing and partnership models are avenues worth exploring.
2. Rethink Long-Term Value Creation: a) Pressure-test your value propositions for resilience and identify clear paths to returns. a) Focus on portfolios, partnerships, and people as the pillars of long-term value creation. Note: Recognize that trade-offs may be necessary for capital-constrained ventures to navigate the current market dynamics.
3. Portfolios, Partnerships, and People: a) Early-stage companies should focus on proof-of-concept indications with fast follow-on possibilities. b) Capital constraints should prompt a comprehensive reevaluation of partnerships across the entire value chain. Note: In light of downsizing and lower valuations, attracting new talent with stock incentives could be a strategic move.
4. Opportunities in Downturn: Understand that the recent downturn is a normal part of the investor enthusiasm cycle. a) Companies delivering products to market and consistently outperforming expectations can still prosper. b) For value investors, opportunities lie in overlooked technologies and high-potential product candidates.Note: In light of downsizing and lower valuations, attracting new talent with stock incentives could be a strategic move
5. Strategic Actions for Food Tech: a) Manage cash closely and consider alternative financing and partnership models in this challenging market. b) Ruthlessly prioritize portfolios, differentiating yourselves by retaining exceptional talent.

In the current market landscape, challenges and opportunities coexist.

Maintain a steadfast focus on your vision, be adaptable when necessary, and persevere with unwavering determination.

Each tech boom and bust carries valuable lessons.

Wishing you resilience, wisdom, and abundant success on your entrepreneurial journey!

Best Regards,

Yip Hon Mun