4 Ways for Founders to Beat the Down Market Doldrums
The key lies in grounding yourself in your purpose and putting your energy into thoughts and actions you can control
I’m talking to lots of entrepreneurs right now; founders who have got a cluster of problems that are linked to the current economic downturn. The most common thing I’m hearing from small entrepreneurs is that they cannot raise venture capital money in what has become a buyer’s market in the past six to 12 months. In other words, the leverage in deal making has shifted away from the founder and toward the investor.
And because the marketplace is so tough right now, venture capitalists and angel investors are looking for better terms, which means valuations are going down. This puts smaller entrepreneurs in a bind, forcing them into looking for a bridge just to get them to the next level. And the companies aren’t necessarily in a position to secure those intermediate funds.
Even bigger companies who have been successful for the past five or 10 years are feeling their categories decline due to marketplace pressures, and so they, too, are having a tough time as of late.
The problem is made more acute by the circumstance that runways are getting shorter. When you have only a few months left of cash and no prospects of easily replenishing the wells, you have a very challenging period for large and small companies alike.
As a result, some of the founders I work with have taken a negative view of the world; one in which they’re telling stories about things not ending well. The stories usually pivot around their understandable fear of going out of business. But it’s this fear, and not data or reasoning, that drives and defines the story in their heads. In coaching them, I point out that if they think about it, they could come up with any number of other stories that would seem just as “true” as the one they’re telling themselves. After all, it’s just a story.
We also discuss some of the things they can do to restore their focus and energy. These include:
Refocus on your purpose
The first is to get back to your personal purpose. It may be as simple, if difficult to face, as admitting that if your current business isn’t in a position to serve your purpose, you may have to figure out another way. And you will figure out another way to support your purpose. That’s why you’re on the planet. Ground yourself in your purpose and recognize that the current vehicle may not be the one that’s ultimately going to fulfill your purpose all the way.
I’ve left three companies without feeling that I had completely accomplished my purpose there, yet each time I felt I learned more to help me fulfill my purpose of scaling impact. The key is to understand how your present situation has, is, or can advance you even a little bit toward your purpose. Once you adopt this mindset, you will find that it gives you a source of positive energy during a difficult period.
Remember, your company serves your purpose, but your purpose is not tied to your company, so even if you lose your company, your purpose will live to thrive another day and in a different way.
Separate fact from story
I was talking to an entrepreneur last week who told me she would never get funded. Period. She had talked to other founders, and they were “saying the same thing.” Okay, I suggested to her, let’s break this down a little. It turned out she had spoken with four investors who said four completely different things. The “never get funding” story was purely her own invention based on those few conversations; the product of her lizard brain or amygdala prompting in her a fast response. In her case, flight rather than fight, since the current economic climate seems too great an adversary to fight.
By taking a deep breath and comparing what the four investors said more closely, we were able to find some room where she might be able to maneuver in the short run.
Consult your playbook
Rather than allow the external threats of the market to seize control of your every thought and emotion, return to the foundation document in which you outlined your rules of engagement. This is the document in which you determine why your company exists, your ideal customer, current marketplace conditions, and key priorities.
When was the last time you checked in with your customer to find out what she was thinking? There might be numerous reasons she’s not buying your product today. It might be that your product isn’t good enough to compete with something new on the shelf. If that turned out to be the case, perhaps your focus should be on tweaking your product rather than closing shop?
The only way you’ll have the data you need to make a decision, however, is to reach out to your customer and find out what they’re thinking and saying and buying.
Your playbook also guides your understanding of your marketplace. What’s going on there? Are you in a category that’s getting hurt by this economy? Or are you in a category that might be able to take advantage of the current situation? The only way you can know is not by talking only to investors or other entrepreneurs but also by re-examining your marketplace and deciding, “what is the number one thing we should be doing right now?” And then do it.
Control the controllable
I’ve taken a couple of the companies I worked with at Findaway Adventures through that process; together, we’ve discovered that staying true to the facts is actually a very productive start to finding creative solutions to problems that seemed like foregone conclusions. The key here is to focus on controlling the controllable. We even went through the exercise of making lists of the things we could and couldn’t control, just so we could focus like a laser on the former and not beat ourselves up about the latter.
You can’t control an investor saying no or a prolonged downturn in the stock market. But you can control the opportunity to call 15 investors to learn more about what options are out there for you now or in the future, if you were to change something.
In conscious leadership we say there are no solutions below the line, where fear and anger reign supreme and we are in victim mode; solutions reside above the line where reason, creativity and positive effort are in charge.
I wish I could say staying above the line means you’ll never go out of business, but I can’t because the marketplace is what it is. But you can ensure that you never become a victim if you stay true to your purpose, separate fact from story, trust your playbook and control the controllable.
Sincerely,
Rob Craven, scalepassion
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All credit to my ghostwriting partner, Dave Moore, who is instrumental in getting my thoughts out in a coherent manner & into these blogs. Thanks Dave!