TECH FUNDING IS OFFICIALLY SLOWING DOWN: 3 WAYS TO SURVIVE THE COOLING (Startup Grind)
This article, written by Patrick Linton, first appeared on the Startup Grind blog. You can read the original post here.
"Silicon Valley's Reality: The party is over" – CNBC
"For Silicon Valley, the Hangover Begins" - Wall Street Journal
"Tech Funding Slowdown Hits Venture Capital Firms" - Bloomberg
You’ve seen the headlines and you read the news. You also probably looked at these headlines with skepticism, because you know how bad the hype can be.
While there may be some significant truth here (according to PitchBook, VC investing in U.S. companies has declined rapidly over Q4 2015 and Q1 2016) there is also opportunity. Instead of obsessing over the macro trends, focus on the practical steps you’re taking today to adapt and prepare.
Here’s the thing: clever, efficient companies who are smart with their finances shouldn’t necessarily be worried. This may seem novel, but wasting money is never a good idea, regardless of the availability of funding.
"Having that much cash on hand can make you sloppy. I like having a little bit of pressure — a little bit of pressure is good for creativity.” - Baiju Prafulkumar Bhatt, cofounder of $50M-funded Robinhood.
There are things you can do today to get creative, especially when it comes to most companies’ #1 expense: payroll. These 3 things will make you more efficient, profitable, nimble, and prepared for whatever comes your way—good and bad.
Look Beyond the “Skills Gap” Hype
"If a company can't attract, or retain, the people it needs to grow or execute its strategic goals, it falls into a skills gap and withers away to irrelevancy." - Gary Beach, author of The U.S.Technology Skills Gap.
Right now, the U.S. has a record number of job openings—a whopping 5.6 million. Companies are finding it increasingly hard to find the right people to fill their vacancies.
In addition, recent data tells us we are in a “candidate’s market,” with employers complaining about a growing “skills gap” — saying they couldn’t find enough qualified applicants to fill current job openings.
Unless you’re setting government policy, or hiring thousands of people this month, this doesn’t have to impact you. But, to keep that impact low you may have to be more flexible on location, and as a startup or small business, you are uniquely positioned to take advantage of a wider world of talent. Qualified employees are out there, and they might even be looking for what you’re offering. The only thing is, they may not be living in your neighborhood.
An Oxford Economics report called Global Talent 2021, says that companies will need to think more broadly about talent. Managers will “need to recruit for talent in new and sometimes unexpected geographies, as talent surpluses develop in some fast-growing markets while mature markets face talent deficits."
Understanding these surpluses and deficits means that you don’t need to worry about the skills gap. In a slowdown, your focus should be on remaining competitive and growing, especially in the face of uncertain funding. You can survive—even thrive—when you ignore the hype and stop worrying about the skills gap.
Follow the Fortune 500 - Become Micro-multinational
Gone are the days of “multinational” being a tag restricted to large companies. Enter the age of the micro-multinational-- "small, self-starting companies that are either ‘born global’ or else leverage online business platforms and the increased openness of the global economy to enter global markets" according to Raj Subramaniam, EVP of Global Marketing and Communications for FedEx.
The most successful companies understand that the answer is not black and white. The lines between what is “international business” and “local business” are blurred. Is any business really completely out of touch with anything international?
"Any entrepreneur or CEO faces a world that is more interconnected and more competitive than ever," says U.S. Secretary of Commerce, Penny Pritzker. All businesses, regardless of size, need to think and operate on a global scale. "To succeed in the 21st century, any smart enterprise knows that its customer base is not just around the corner, but around the world."
If 100% local is no longer a viable option, the other extreme doesn’t have to be true either - a 100% remote-first approach that many tech startups embrace is not feasible for many organizations. You probably need a bit of both.
“I think hiring locally is important, but at the end of the day we are building businesses. And businesses stay alive by being efficient with their capital.” - Tyson Quick, CEO of Instapage.
Looking to find, attract, and retain good people outside of the morning commute and outside of the borders of your city, state, and country is a step in the right direction. But, it is important to see that it may present challenges. Recognize which positions can be done remotely, how many should (or have to) remain local, and what you need to do to keep your remote team productive.
Hire based on your startup’s lifecycle
At game developer Pocket Gem, Carrie Simonds broke down their hiring needs by phase. She explains that the “ideal employee for a 3-person unfunded incubation may not be the best fit for a 50-person company looking to expand overseas."
And it’s not just about watching headcount. “Keep a close eye on your burn rate as you consider expanding staff or benefits,” says Tim Goetz, CEO and co-founder of Aplos. More than ever, employers are called to reassess their business decisions, especially when it comes to hiring.
Define unique triggers right for you that tell your team it's time to bring in a new person, fill a new role, or expand a team. Setting triggers or milestones will tell you that it's the right time to open a specific role.
So, it’s time to prepare. “You’ve got to make a quick decision now,” urges Rory O’Driscoll, a partner with venture firm Scale Venture Partners.
And, start with what powers your business: the best people.
ABOUT PATRICK LINTON
Patrick Linton is an entrepreneur, writer and advisor to fast growing organizations looking to expand their talent footprint in developing Asia. He is the Co-Founder & CEO of Bolton Remote, an offshore teambuilding service whose mission is to connect incredible emerging market talent with world-class businesses - all remotely - and in turn, help these companies become more competitive, profitable, and nimble. Patrick runs Bolton Remote from Singapore, the Philippines and the United States, serving companies across North America, Australiasia and Europe.