Pete Flint, General Partner @ NFX & Founder @ Trulia:

I shared some thoughts on this in April 2020, as we were facing up to the largest economic disruption in a lifetime. The key points were:

• Decisions you make depend largely on your cash position. If you are enduring losses relative to a modest cash position, sadly you don’t have the luxury to invest in growth. You should prioritise reducing your cash outflow and extending your runway (either through reaching profitability or raising a new round). 

• Profitability in your unit economics should be a priority regardless of your position (you can’t afford to make a loss on every transaction)

• Focus on strengthening your LTV/CAC ratio (the metric comparing the value of a customer over their lifetime to the cost of acquiring them)

Much of this remains as true now as it did then. The public markets (which in turn will be reflected in the private markets) are favouring profitability over growth in the near term—so founders should prioritise this. 

If you’re looking to extend your runway through raising capital, you must have exceptional metrics (both rapid growth AND strong unit economics/profitability driven by high NPS and retention in big markets). Otherwise, you should optimise to raise your next capital after the start of 2024, giving you enough time to improve your metrics and your product. 

Crucially though, if you are pre-product market fit (pre-seed or seed), then don’t push growth. A great signifier of good product market fit is that growth finds you. So keep your team small and nimble, both helping you extend your runway and making it easier to evolve and pivot to find product market fit. Once you’ve got your product-market fit, then it’s time to focus on growth. 

Henry Lane Fox, CEO & Co-founder @ Founders Factory:

I think it's fair to assume that the next 18 months will represent a very tough operating environment. With inflation out of control and interest rates likely to rise substantially, consumer spend will come under increasing pressure as the prices of energy and food continue to rise and contribute to a cost-of-living crisis. Businesses in turn will feel pressured as the cost of debt rises, revenues likely stagnate, and hopes for growth diminish. 

Where does this leave startups? I still argue in a great position. Across all industries the speed of digitisation is increasing and yet incumbents will find it harder and harder to invest in innovation and growth, which provides ambitious entrepreneurs with a clear opportunity to disrupt. 

To capitalise on this opportunity a few things will be of central importance: the development of a product that offers clear and immediate 10x value; a relentless focus on constantly improving underlying unit economics; an understanding of the most scalable growth channels; accurate cash flow forecasting.

Clearly there is variability across business models and sectors—metrics for enterprise SaaS, consumer marketplace and deep tech start-ups all vary. But some universal truths exist: 

• For those fundraising now, try to bank enough cash for a 24-month runway, rather than 18 (If ever there was a time to do a convertible note at your last round's price to help you put some more cash in bank, this is it)

• Be relentless in understanding and optimising your unit economics, so that any investment in growth you make has a fast and positive payback

• Talk to your board and investors (current and prospective) to understand what metrics you are likely to need to hit to raise your next round of financing

• Build your financial forecast around these metrics and report against them consistently

• Do all this while keeping the question in the back of your mind: if you had to drive the business to cash-flow breakeven in the next three months, what would you do? 

Overall though be positive, opportunistic and take risks—startups rarely succeed, none hit scale, by playing it safe.