This article provides guidance for startups and companies facing an economic downturn. It suggests that scenario planning should be a top priority for businesses with 12-36 months of runway, particularly those in deep tech and climate tech sectors. The author proposes the following strategies:
- Default-alive plan: Create a plan to ensure survival even if you can’t raise additional funding. This includes reducing costs, prioritizing cash flow, and making tough decisions about talent.
- Progress over profit: Focus on progress rather than just cutting costs. This means ensuring that your company is still making meaningful progress towards its goals, even if it’s not at the same pace as before.
- Fiscal discipline: Implement a culture of frugality and strict cash forecasting to ensure you’re managing your finances effectively.
- Non-dilutive funding: Consider non-dilutive funding options like government grants and programs to extend your runway without giving up equity.
- Debt as part of capital formation strategy: Include debt as part of your capital formation strategy to access additional funds without diluting ownership.
The article also emphasizes the importance of maintaining strict vigilance over your burn, runway, and cash-to-profitability numbers, reassessing the market and decision tree every quarter.