Like many venture-backed entrepreneurs and operators, I have been thinking about the relatively sudden change in the environment, and how it must be impacting those around the world who are in a similar situation. The whipsaw of the macroeconomic context that hit public markets and has trickled down to private assets has been swift and painful for many, with little visibility on whether or not we are approaching stability.
The last few years have certainly been an adventure:
*In 2020, we saw the onset of the pandemic, and almost overnight what looked like the beginning of a huge recession. The response was "slow down, be very prudent, and curb spending";
*Only a few months later, after governments globally intervened to various degrees with an unprecedented double-down on QE, we experienced a recovery like no other. The response was "grow grow grow, money is cheap, move fast".
This spilled over into 2021, which was defined by unfettered exuberance on all fronts, with a particular bubble in risk assets that led to sky-high valuations and seemingly constant liquidity events;
*Finally, in 2022 the start of the war in Ukraine along with the (well overdue!) tightening of monetary and fiscal policy has taken us into a risk-off environment that is being compared to many of the worst recessions in history. The response now is ""slow down, be very prudent, and curb spending". Sound familiar?
These types of volatile macro events can (and often do) lead to micro (i.e. business) pendulum swings that can naturally be really hard to manage. This is especially true if companies allow themselves to be pulled to the extreme. What does that mean for founders and venture-backed companies? Well, I believe that a growth at all cost mentality is, in my opinion, shortsighted. For us at Cyclica, we are doing what we've always done - remain balanced and sensible, while also remaining steadfast to our convictions and our vision. We're working to create something profoundly impactful and sustainable, and to do so, we've challenged ourselves to not get overly excited or irrationally exuberant in frothy markets or overly restricted or conservative in tight markets.
The reason I feel so strongly that it is possible for us to adapt successfully is that, frankly, since we started Cyclica it's never been particularly easy for us. We have calloused hands and brass knuckles from fighting to build what we've built. I'd like to believe that the past 9 years prepared us for these types of events. We made a lot of mistakes along our journey which taught us to focus on fundamentals (the "steak") and refrained from the hype (the "sizzle"). The wisdom we have gleaned from this experience will serve us well going forward if we decide to lean on it.
In the meantime, we can't let ourselves forget a set of first-principles based concepts:
- Focus on the fundamentals while keeping your eye on your north star
- Find ways to grow efficiently
- Figure out profitable business models as you scale
- Fix spending guardrails for all teams
- Fill your treasury with a buffer
I do know one thing: having lived through this unique period in history, things always ebb and flow, and one needs to factor that (even if it’s not yet known) into planning. As is said in golf, even if the forecast is sunny, it's prudent to bring your umbrella!
Wishing all of my fellow founders strength and resolve as we navigate these times together.