I understand that the macro environment is changing, shall I cut costs?
Our fifth video in the series of 1-minute tips for startup founders from Alexander Konoplyasty, co-founder of Flashpoint Venture Capital.
❓”I understand that the macro environment is changing, shall I cut costs?”
👉 If your cash runway is less than 18 months, it is time to rethink your expenses
As interest rates are going up, less liquidity is available for the VC sector, strategics are buying at lower multiples, we are trying to evaluate what it means for the start-ups. Firstly, investors are starting to be more focussed on the business efficiency metrics – LTV/CAC, rule of 40, cash runway, etc. This does not mean that you need to entirely change your GTM strategy or abandon the product roadmap. But if your cash runway is less than 18 months, it is time to rethink your expenses. Cut the most expensive personnel, cut non-core projects or geos, minimise non-core R&D, cut marketing channels that are not generating high LTV-CAC. If you have been planning for expansion and created thick G&A, it is time to rethink that.
If you are only launching, think how you could potentially bootstrap, generating revenue to pay for your growth. If you need to fundraise, there is still liquidity available for good teams, products and smart GTM strategies.