Op-ed: What the tech downturn means for founders, and how to navigate it

Pitch founder and CEO Christian Reber shares the five questions founders should ask themselves to adapt to the potentially rocky road ahead.
Op-ed: What the tech downturn means for founders, and how to navigate it

We’ve just entered a brave new world in tech. 

Recent valuations of public tech companies have declined significantly, with share prices for companies like HubSpot and UIPath down 50% or more relative to six months ago. The market correction is triggering a parallel fundraising pullback among VC, and startups everywhere are feeling the shockwaves. Layoffs abound.

The same question is weighing on every founder’s mind right now: How do I guide my team through this new, uncertain era? As a serial entrepreneur and active angel investor, I wanted to share my take on what’s going on, and offer some essential questions founders should be asking themselves as they chart their own course. 

A new era with tough choices

War, COVID, and inflation are all driving this downturn, but there is no denying that public tech companies have been overvalued. 

For the past 13 years, stocks have soared on the back of an incredible bull market, and an entire generation of founders has grown up in a VC culture that has supported raising increasingly large rounds at ballooning valuations every two years or so. 

As a member of that generation, I’ll be the first to admit we had it good. 

Fundraising on similarly generous terms between now and 2024 looks unlikely. VCs are going to be scrutinizing fundamentals far more thoroughly than before, and revenue, not user growth, is going to be the new priority.

The bull run is over, and founders need to course-correct for this new environment. That means making difficult choices, no matter their startups’ level of funding, maturity, or growth rate. 

At Pitch, we’ve laid out our plans for adapting to the current tech downturn. Here are the questions we’ve asked ourselves to chart our course:

1. Do we really need to keep hiring? 

Startups like to use team growth to show momentum: More people working on more things means more results. But there’s a serious cost to hiring, and it’s not just financial in nature. Interviewing and onboarding both take significant time and focus away from your team’s most urgent challenges.

My team went from 25 to 200 people in just four years. We were planning to make another ~100 hires by the end of 2023, but instead, we’re capping our size at 200, and we’ll only be backfilling essential roles through next year. 

Now, without the burden of hiring, we’ve got more time to focus on what’s essential: product and sales.

2. Are we as cost-efficient as possible?

If you're a founder, taking steps to extend your runway should be at the top of your to-do list right now. That means looking for ways to lower your operational costs, and tasking your department leads with eliminating non-growth-related line items from their budgets. This takes discipline and a rigorous commitment to your strategy, but it’s also an opportunity for your team to develop resilience and learn to accomplish more with less. 

Once you’ve pared down the extraneous costs, you can focus on execution, invest strategically, and give yourself the best shot at avoiding layoffs.

3. Is our organisation designed for maximum productivity?

As my teammate (and Pitch COO) Åsa discussed at the Summit recently, effective organisational design means orienting your team around your strategy — not the other way around.

In moments like these, it’s especially important that your structure reflects your growth plan. At Pitch, that means setting up every last inch of our organisation for product-led growth and product excellence.

There’s a benefit to doing this that extends beyond productivity. When teams are set up to contribute to the company’s strategy, they’re happier. Not only will you unlock the potential of your best performers; you’ll keep them around. 

4. Are we keeping it real with our teams?

This is a scary time. It’s been tough to wake up to headlines about layoffs at tech firms, and to see brilliant founders in our industry fighting to survive. 

Employees across the industry are naturally nervous for their jobs, so being open with your teams at this time is critical. That’s why we've shared our financing approach with every employee, and will continue to provide a long-term strategy and outlook to everyone.  

This is a make-or-break moment for culture, so it is vital to give everyone confidence and clarity in our direction — and stay close to our team to preserve their trust.

5. Have we kept our options open for whatever the future holds?

I remain incredibly bullish on the future of tech, but it isn't likely that the market will recover any time soon. I think we’re in for a tough stretch for at least 12 to 24 months.

When the market does rally and recover, it’s going to happen quickly, and it’s how you react that counts. So we’re setting none of these above measures in stone, and we’re staying open-minded and ready to hit the gas pedal again.

Keeping our options open for the future remains my top priority. And if you’re a founder like me, it should be yours, too.

Lead image: Jonathan Letniak 

Follow the developments in the technology world. What would you like us to deliver to you?
Your subscription registration has been successfully created.