Beating the Bear: How to Navigate a Turbulent Market

After over a decade of bull stock prices, the recent volatility of the market has left some founders reeling. First-time founders, especially, are struggling to adapt to a less plentiful market and more cautious investors. But navigating a turbulent market is possible if you have the right strategy.

Paul Jun, CFO at Pilot, and Sarah Guo, Board Partner and Strategic Advisor at Greylock, have a lot of wisdom to offer when it comes to dealing with a downturn in the market. During our recent webinar, Paul and Sarah chatted about moving from a bull market to a bear one, how your business can flourish within constraints, and why it’s important to empathize with investors. Here are some of the highlights around how to navigate a turbulent market: 

Understand What Drives Your Business

Information is the fuel that keeps your company’s momentum up. No matter what the market looks like, if you want your business to succeed, you have to know every inch of it inside and out.

“You want to closely understand what drives your business and what's going to be important to your short term, your medium, and long term,” Paul said.

What’s your burn rate? How much runway do you have? What are your hiring plans? How much of your budget do you spend on sales and marketing?

Weigh out what strategies are optional and which ones are required so you can keep your business going. When you know what’s powering your business’s success, it’s easier to maximize those resources and get rid of dead weight.

Beware of Constraints

Early career founders who have never experienced a downturn or a bear market are struggling with today’s volatility. Their lived experience has largely consisted of increasing capital availability and lots of cash flow. So, the first thing founders need to do is accept that there are more constraints in place now.

“I think all the very best founders, they're all going to grow and understand the new environment, but it takes a little bit of adjusting to,” Sarah said.

That means fighting your instincts. A lot of young founders, according to Sarah, think more fundraising is the answer to uncertain market fluctuations. That may be part of the answer, but the rules have changed so much that the availability of capital at sky-high prices is much lower.

Instead, founders should evaluate the market’s constraints and try to work within them. The rules of the game have changed, so it’s time for your strategy to change with them. The more you work with your constraints instead of against them, the easier it will be to keep your business moving in the right direction.

Understand Your Investors

As scary as this market shift is for entrepreneurs, it’s just as scary for their investors. They’ve got a lot of money tied up in investments, so it stands to reason they’re going to be cautious about where they put that money in such an unpredictable market.

The more concerned investors are with the state of the market, the less likely they are to invest in your company. But if you want to change investors’ minds, first you have to understand them.

“Put a little bit of effort into, maybe empathy is not the right word, but understanding what the position of their investors is,” Sarah said.

Discover their fears and hesitancies. When you know what’s holding them back from investing, you can develop a strategy that addresses all of those worries. The better you know your investor, the easier it is to alleviate their fears.

Discover Your Priorities 

When your resources are limited, you can’t do everything. So you have to figure out which items are “must-do” and which ones are “nice to have.”

“There are things you need to probably prioritize within the constraints that you have,” Paul said. “It probably isn't a scenario for most companies to be cash flow positive.”

That may involve reprioritizing how you spend money, spend your time, and how to think about using your limited resources. When the market goes down, you have to focus on survival. So make sure you’re prioritizing needs over wants.

Don’t Be Afraid of Mistakes

You will make mistakes—every company does. Fundraising isn’t easy, and even high-quality companies that work hard to get it right inevitably slip up every once in a while. But even when you do make a mistake, it doesn’t mean your company is destined for failure.

“I've never met a company where execution is perfect the whole journey to acquisition or IPO,” Sarah said.

A mistake isn’t the end of your company’s journey, it’s just an opportunity to do things differently. You may have to take on more dilution than you expected to, or maybe people aren’t investing the way you thought they would. But ultimately, that doesn’t hurt the business’s ability to grow.

Don’t let your mistakes define you. Let them push you to become a better company.

Use Creativity to Come Out Ahead

If you aren’t being as aggressive as your competitors, are you going to get left behind? According to Sarah, aggression isn’t the only way to get ahead. Even in a limited market, there are a variety of ways to gain an edge. But if your competitors are the ones getting ahead, you’ll want to figure out why—and how.

“There’s only two choices here: they may be resourced differently from you, or they may be investing better than you,” Sarah said.

In a bear market, getting ahead is all about strategy. Once you know why your competitors are getting ahead, you can figure out how to close the gap. That means getting creative.

When there are constraints on the market, everyone’s pool of options shrinks. So, you have to think outside the box. If your team is smart and creative, you can come out ahead.

Building a business in a bear market takes a lot of grit and determination. But if you know what you need to do and can figure out a creative way to do it, you can go up even when the market’s going down.

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To learn more about steering your business through a bear market, watch the session: How to Navigate Turbulent Markets. 

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