Late last month I led a virtual Meetup for HotTopics’ Business Leaders community—CEOs, investors, advisors and NEDs—alongside Atara Partners. Meetups are opportunities for our leadership communities to virtually debate a key topic; in this case we discussed 'Making Sense of Market Turmoil’.
Much of what was said held learnings I believe the whole C-suite can utilise.
First, the quantitative evidence of ‘turmoil’. Since the beginning of 2022, the technology-heavy Nasdaq Composite has declined 23 percent. Global venture funding reached a thirteen-quarter low in 2023’s Q1. The fundraising climate is in its most chaotic state in 15 years.
This impacts every business—and by extension, its leaders. The ability to raise equity in one part of the economy raises optimism in others: whether you’re a CMO whose budgets are being streamlined, Chief Data Officers now getting creative with hiring strategies, or a CIO with a mismatched investment portfolio, your experiences are effects of the same inclement weather system felt by Founders, only with a lag time of a quarter or two. Yet that lag time also means you can learn from how those elsewhere are adapting to these challenging markets.
Here’s a selection of how our Business Leaders community are courting investment right now, with lessons for how the rest of the C-suite should approach your own challenges.
- Push back the ETA. Founders looking to raise capital are putting in more buffer time to account for the unexpected. Other leaders should do the same, for new projects, quarter-to-quarter reporting and ROI from new partnerships, as examples. This extra cushion time sets expectations as well as alleviates the team of destructive added pressure; if the cushion time is not needed in the end, use the time to check the work and perfect—or to breathe before the next project. Downturns are marathons, not sprints.
- Mobilise your cheerleaders. Founders are now better at proactively engaging with their existing investors about upcoming fundraising plans because even having one of them commit early to participating in, or leading, a round can serve as a strong endorsement for others to follow. That tactic should be replicated. If preparing to court the Board for more funding or looking to mobilise the team, get key individuals on side early as a momentum builder. It’s harder to say no to something that already has tacit approval and encouragement.
- Maintain and build relationships. The group experienced first-hand the importance their pre-Covid relationships had on their ability to weather post-Covid market turmoil. I know from my own conversations with C-suite leaders the same is true for many in the HotTopics community. It’s never too early (or late) to build relationships within your ecosystem, from both a commercial and strategic partnership perspective. Both internally and externally, professionally and personally, the networks and communities one builds can make or break a career.
- Trip yourself up. Before any negotiation or review, ask yourself the difficult questions. Founders know investors will challenge them on their weak spots. CEOs and Boards (and sometimes even wider teams) are no different. This allows you to anticipate key concerns and proactively address them by preparing materials and answers in advance.
- Growth at all costs is over. This has a less direct C-suite parallel, but is perhaps all the more interesting for it. A downturn means Founders shouldn’t pursue growth at the expense of profitability, as they have been doing for the last decade: a strong market environment favours growth, with investors rewarding startups that were able to demonstrate rapid growth even at the cost of profitability. Today, we heard investors are putting more weight on profitability. As a C-suite leader, this should be considered as you continually adapt and evolve your plans. CEOs and CFOs are under immense pressure to stave off slumps, and they will now be looking more closely at the profitability of each function, regardless of its growth trajectories.
Given my position, listening to three different leadership communities within HotTopics—marketing, technology, business—over the last few years, drawing parallels between your respective challenges and opportunities has become something akin to a habit. But the link between Founders and the rest of the C-suite is different: the former normally feels the effects of market turbulence first.
Consider them the canaries in the coal mine for the C-suite—and listen.
