Mayfield’s Navin Chaddha: I’ve checked out clouds from each side now

Each period is totally different, however listed here are some suggestions for our new regular

I’ve regarded at tech from each side now (h/t Joni Mitchell), as a three-time entrepreneur and as a enterprise investor by way of two downturns.

On the startup facet, my first firm, VXtreme, was acquired by Microsoft and have become the platform for media streaming over the web. My second expertise was the rocket ship run as much as an IPO and subsequent nosedive in valuation that characterised so many startups within the dot-com period.

My third startup had been available in the market solely a 12 months when the web bubble burst and had not but discovered product-market match. To outlive, we needed to take drastic measures, together with two rounds of layoffs till we had been capable of merge with one other firm, which continues to be thriving right now.

As a enterprise investor, I’ve invested in over 60 corporations, and whereas many have gone public or been acquired, the journey has included pivots, near-death experiences and navigating by way of the 2008/2009 downturn.

At present, as folks throw round scary phrases like cram downs, construction, ratchets, illiquid portfolios and wind down of funds, I actually empathize with founders of corporations who’re having hassle elevating capital, have seen their valuation drop and are making robust survival choices.

Each period is totally different, however listed here are some suggestions for our new regular:

If you happen to’re out elevating cash, due diligence your investor

In a time of contraction, companies with funds which are near their finish of life might be below tight constraints and should not have allotted sufficient follow-on capital for his or her present investments.

Reserve administration can change into a problem, and present traders received’t be capable of come by way of on their pro-rata quantities, particularly for those who’re conducting inside rounds or bridge extensions. So, as a part of your analysis of traders, it’s best to ask which fund they’re investing from, how far alongside they’re in investing it and the way a lot they maintain in reserves for future rounds.

It will assist you make sure that they will proceed to assist your future capital wants.

Be inventive when tightening the belt

When capital is scarce, it’s important to be keen to kill your darlings so you’ll be able to prolong your runway.

At Rivio, my third startup as a founder, we got here up with a zero-based finances plan after the dot-com bust that assumed we’d don’t have any entry to any future capital. We then drastically minimize product options, re-thought our go-to-market technique and rightsized the enterprise.

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