Advice for Investors in a Downturn: Don’t Panic • TechCrunch

How to compete without losing your mind – and your track

Compete more and more a cluttered space can be nerve-wracking. Compete more and more a crowded space in a challenging fundraising environment is even more nerve-wracking.

We all know that money isn’t as readily available in 2022 as it is in 2021. This puts startups in the position of having to compete without losing the lead – or the trail.

At TechCrunch Disrupt 2022, I interviewed Ramp CEO Eric Glyman, Airbase CEO Thejo Kote, and Anthemis partner Ruth Foxe Blader on the subject. Glyman and Kote shared how they work to preserve capital, while Blader offered some of the advice she gives to her portfolio companies. And she didn’t hold back.

For those unfamiliar, both Glyman and Kote run expense management startups. As friendly competitors, they recognized that even if the category is not the winner, it is always important to be different and innovate constantly.

Says Glyman: “One of the things we did in our business was look at the cost of acquisition — to fully recover the deployed cost — and we lowered that threshold,” he said. “And so our view is that we want to grow as fast as possible, but with a much faster tolerance – the same way you can get a higher return elsewhere, by applying this rigorous framework where you choose to. deploy capital. We believe this is the right approach for this environment.

For Kote, it’s mostly a matter of focus. Airbase, he noted, has always targeted the middle market and early-stage businesses. He referred to “the crazy time of 2021 where there was all the craziness around investing in this space”, with investors “ready to pay multiples of 100x, 200x”. Rather than frantically trying to change Airbase’s model to meet expectations, Kote said the startup is continuing to operate as it always has.

“So a silver lining from a focus standpoint for us this year has been, ‘You know what? None of that matters,” Kote said. “We were very focused on subscription revenue and high margin subscription revenue and net ARR – not gross ARR. So we stayed true to what we’ve always done, which is middle market focus. And that meant we freed up resources in a number of ways, giving us an additional lead.

Meanwhile, Blader – whose company invests at all stages of the lifecycle – shared his belief that “it’s a feeling-driven industry, and when the music plays, everyone dances”.

“People who have danced into 2021 and raised a bunch of capital — enough capital to break even with maybe a bit of a burn, are probably feeling pretty good,” she said. “And people who have really underraised or haven’t raised or raised capital at a valuation where they really can’t close the gap between where the multiples were and where they are now, are slightly panicked .”

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