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How startups should handle the downturn


Mike Volpi

Mike Volpi is a general partner at Index Ventures. He joined the firm in 2009 to help establish Index’s San Francisco office with Danny Rimer.

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The 2022 crisis is the third major tech downturn of the internet era, following the dot-com bubble and the Great Recession.
Many experts are dispensing advice to founders on how to weather this storm. While this advice is broadly helpful, we must consider that it’s been approximately 14 years since the last major correction, and few in our industry have actively gone through a full economic cycle. Therefore, it is important to remember that good advice is tailored, specific and, more importantly, contextual.
Each company is unique and faces diverse circumstances. Does a downturn affect every company identically? No. Do some companies have more favorable balance sheets than others? Yes. Are some companies able to raise funds even in difficult circumstances? Absolutely.
The best advice for handling the downturn should be based on the length of your runway and the efficiency of your business. Runway falls into one of three categories:

Two years or more;
Between one and two years;
A year or less.

The corresponding strategy for each would be, respectively, “stay aggressive,” “ruthlessly prioritize,” and “time to trim.”
Editor’s Note: TechCrunch+ …

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