We are in unprecedented challenging times. A 100+ day war that shows no sign of ending. The largest annual increase in the inflation rate since 1981. A bear market for stocks with a 30.3% drop in the NASDAQ and a 20.6% drop in S&P 500 (as of June 30). At the same time tech stocks from recent IPOs are down 50-80% from their peak and most are trading below their IPO price. A crypto winter. A pandemic that has become endemic. Average gas prices of $6+/gallon. A reversal in women’s rights. Continued gun violence. The left hooks and right hooks keep coming for us in 2022, and show no signs of ending.
However, I have observed that the most important quality demonstrated by great leaders is that of bold optimism, even in the face of seemingly insurmountable odds. I believe a crisis can be an opportunity for the bold. But thriving in a crisis requires a playbook.
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Wartime leaders act with agility, urgency and a bias to action mindset. You have to do that now. However, you also have to be truly empathetic to all your stakeholders – your employees whose stock options are underwater and who fear for their jobs; your customers who are fighting their own fight to be loyal to you; your investors who took a leap of faith and whose portfolio value has been dramatically marked down; and your family who helps you make the daily sacrifices so you can do your job. In fact, it is even better if you can go beyond empathy to become a compassionate leader – someone who is willing to relieve the suffering of another. So ask yourself every day, what can I do to help someone else – my co-founder, my employees, my customers, my family – and you will find that getting through the day just got easier.
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One of my beliefs is that start-ups die of indigestion, not starvation. Being able to focus on the essentials – why you dreamed of starting this company, how the world will be different when you succeed, what kind of culture you are fostering, and why your product is a must-have – becomes even more important when your audiences are distracted. Some examples of our companies who maintained their focus and were rewarded for that include one that has prioritized user privacy and was able to close a Series C at a favorable valuation, another who is leveraging CRISPR to save lives which is inspiring big pharma to partner with them, and one focused on elevating the salesperson by providing a sales engagement platform where sales people do their work, resulting in it being named a category leader.
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A zero-based plan assumes you have no further access to capital, bringing discipline to your spend. Often this exercise reveals nice-to-have projects which can be canceled, and even must-have projects that can be paused or delayed. Having a clear dashboard of KPIs by which to navigate the business is critical now. The general belief is that the pendulum has swung from growth at all costs to growth with an eye to profitability – some key metrics you have to monitor include gross churn rates, net dollar retention, new bookings and cash burn.
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Growing from founder to CEO can be lonely, and can be especially hard when times are tough, but remember that it is not a solo journey. If you are able to include your employees with the context for hard decisions, even if it means laying them off, they will leave with an appreciation for your actions. Making time to simply ask them about their fears and celebrating their contributions is a daily habit that will serve you well. In Leading with Heart, Silicon Valley coach John Baird says that great leaders have five core common characteristics – they are aware of their people’s needs, they confront people’s fears, they understand their own desires and those of their people, they leverage their gifts, and they connect with purpose. By unlocking these qualities, great leaders are able to “make people feel seen, inspire creative thinking, and ultimately drive bottom-line business results.”
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One of your best allies can be a trusted board member, but make sure you understand their reality first. Investors are bleeding from late-stage portfolio markdowns, extending your runway with insider-led rounds, and being forced to take a pause or become “pencils up” to recover from their rapid pace of investing over the last couple of years. We believe in radical candor and think it is fine for you to ask your investor about their business, so they can better support your needs. For an early-stage investor like us who raised $750 million across two funds in March 2020 and invests in inception stage companies with check sizes between $1 and $14 million, while we have doubled our pace of new investments since January 2022, our doors are still open to partner with new entrepreneurs. And because we have maintained a measured pace of 10-12 investments annually and take a board seat in almost every case, we still have ample bandwidth to support our existing founders.
I know this is an oft-repeated Silicon Valley phrase, but our experience has proven this to be true. It took Lyft, Poshmark and HashiCorp – three of our companies that built an authentic culture, established category leadership, and held a successful public offering – a decade from founding to escape velocity, with lots of twists and turns along the way. As Lyft co-founder Logan Green says, “For years I lived in this world where the cliff was always three months away. I mentally got very comfortable with living in a world of immense risk and immense threats.”
I’ve lived through two previous recessions as an entrepreneur and investor, and whenever times get tough I channel my anthem, the theme from Rocky III, Eye of the Tiger (no, really). “Don’t lose your grip on the dreams of the past / you must fight just to keep them alive.” Our current environment may be challenging and call for difficult decisions, but I am truly an eternal believer in the power of entrepreneurs. And while some VCs may be pencils up, as a People-First firm which has invested in over 500 companies, 120 of which have gone public and over 200 have been acquired, at Mayfield, we have learned that many great companies are often created in tough times. Our team of founders turned investors is eager to partner with entrepreneurs who are changing the way we live, work and play, and we look forward to our shared inception to iconic journey.
