The Great Reset is Upon us. Technology valuations are adjusting to a new market reality.

1. The Great Reset

5. In an informal survey…
• 82% of Venture Capital respondents expressed caution
or caution or concern going into 2016
• 90% of respondents expect valuations to go down
during 2016; 30% expecting “significant” declines
• 77% of respondents expect financings to take longer

6. Greed will Return.
Be Alive when it does.

7. The Great Reset

8. Best Case: A Tech Centric Valuation Reset
 Venture and growth equity valuations will continue to contract; already have
 Private debt and equity capital will be harder to access
 Fewer investors motivated to deploy capital; particularly Series B, C, D and growth capital
 Longer financing timelines
 Hedge funds and other non-traditional sources of venture/growth financing will sit on the sidelines
 Implications:
 Poorly run companies/companies in tough sectors will fail… they always do
 Some good companies whose burn is too high will fail due to inability to access new investor
capital and existing investor fatigue or lack of reserves
 For all, the bar for getting financing will be higher as investor focus shifts from growth at any price
to a fiscally disciplined balance between growth and profitability
 Exits will take longer
What we Know

9. Much More Than We Do Know
 Recession?
 Implications for demand for technology services/products
you sell?
 Duration and depth?
What we Don’t Know
All unknowable… and potentially more impactful than
the tech valuation reset.

10. What we Don’t Know
Don’t bother planning for the un-knowables.
If you can’t control it, it is irrelevant to you.
Focus on what you can control!
Remember: Great companies are built in
every economic cycle

11. The Great Reset

12. The Great Reset is REAL.
This is not a grand conspiracy by
Venture Capital investors to drive your
valuation down.

13. Neither WILLFUL IGNORANCE… …nor PANIC
will help you Survive and Thrive.

14. Discard your horn envy.

15. Some have
proposed…

16. Some have
proposed…
the Cockroach.
Resilient, Durable, Difficult to Kill.

17. An alternative I prefer…

18. An alternative I prefer…
the WorkHorse.
Tough, Sturdy, Dependable,
Docile, Patient…
Strong even in the presence
of a storm.

19. Shed CEO Shame by taking pre-emptive cost reduction measures
 Kill unproductive or very long-lived initiatives and pet projects
 Remove underperformers and underutilized staff from your organization
Upgrade talent where possible… there will be high quality talent displaced
Measure and monitor growth initiatives
 Kill unproductive growth initiatives
 Reallocate capital to those growth initiatives that drive quantifiable results
Maniacally evaluate demand indicators… adjust accordingly
 Funnel strength
 Churn
 Sales cycle
Consider taking annual subscriptions up front; accelerate your cash flow
Draft a contingency plan today… keep it in your desk drawer
Inside the Business

20. Control your destiny.. remove dependency on new investor capital
 Manage to profitability if you can
 Raise additional capital if you can… even if it means taking more
dilution
 Start raising before you need to
Financing
RULE OF 40
Organic Growth Rate + EBITDA Profit Margin
Manage to the Rule of 40%
 Drive growth, but not at all cost
 If you can grow faster than 40% and
stay profitable, by all means…
Growth % + EBITDA
40 + Break-even
30 + 10% Profit
20 + 20% Profit

21. Financing
Have an adult conversation with your
investors about your business’ capital needs,
your investors’ reserves and the milestones
you need to achieve to unlock them.
Don’t allow this to be
ambiguous!
Ambiguity is the enemy

22. If your burn is > $500k per month or your runway is less than
12 months…
And if your current investors don’t have the reserves and risk
tolerance to continue at that pace…
Caveat

23. If your burn is > $500k per month or your runway is less than
12 months…
And if your current investors don’t have the reserves and risk
tolerance to continue at that pace…
Then you probably need to take more aggressive
measures:
 Narrow your execution focus
 Cut costs; this probably means letting go some staff
Caveat

24. The Great Reset

25. Change Your Psychology Around Value
Creation
Shift from a Theoretical view (Unicorns) of what
produces value in your business…
To a Fundamental (Workhorses) view of what
creates value.

26. You know what creates value?

27. You know what creates value?
Generating more cash
than what you spend!

28. Extend your Runway and Reduce Dependence
on Outside Capital
 If profitable, meter growth and grow as fast as you can while remaining profitable
 For all:
 Take more capital if you can; if it means more dilution
 Reduce wasteful spending
 Live within your existing investor syndicates means
 Start fundraising early if you require outside capital
Be Opportunistic… and Selective
 Narrow your focus on the few things that you know create value
 Reallocate effort and capital to growth initiatives that produce quantifiable results
 Look for opportunities to displace weak competitors or pick up strategic assets
 Upgrade talent

29. Build a Great Company
You Have to Be Present to Win!

30. For More Information