Welcome to In the Trenches. It’s great to have thousands of you here. My goal with this newsletter is to be all signal and no noise.

With that said, let's get into it

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This week I want to share a story of one of the most challenging startup experiences I’ve been through. Though at the time it was gut wrenching, I’m incredibly grateful for it - the experience gave me a framework on company building that I have applied ever since. I am sharing it today because it is incredibly relevant in the current environment.

In 2016, I was a part of a small scrappy team that aspired to change the landscape of legal research. We had a few million in ARR and went out to raise our next round. In the midst of the fundraise, SaaS multiples tumbled by 50%+ and the entire fundraising environment flipped. Expectations shifted seemingly overnight from vision and narrative to revenue and unit economics. Sound familiar?

We ended up raising capital and eventually sold the business for a positive outcome—but I learned a powerful lesson: never be at the whim of the capital markets.

The best business operators and capital allocators act with discipline in balancing risk and growth regardless of market cycle.

Today’s market cycle is tough. The conditions are rough out there. Here is a framework I’ve recommended to a number of Founders to evaluate their business. It’s also one I use in operating my business right now:

O-O-D-A: Observe. Orient. Decide. Act.

I. OBSERVE: Understand the gravity of your situation

If you’re a Founder that has raised money:

• How much did you just raise and at what valuation? Chop it by 50-80%. That’s your new valuation.
• Ask yourself what it’s going to take to get back to this valuation on your cash in the bank. Is it possible? If not, that’s obviously not ideal, but it’s not acceptable to not internalize and acknowledge it. You are going to need act thoughtfully to restructure the business and have a shot at preserving your equity value

If you’re a Founder that hasn’t raised money:

• How is your business performing?
• Do you have enough cash in the bank / are you on strong financial footing to steward the business?

II. ORIENT: Define the gameplan for your business

• You should now have a clear viewpoint of where the company is in relation to where you want it to be.
• Translate this into specific language that each core team understands. Each team should have revised metrics that line up with the company northstar.

III. DECIDE: Move swiftly and intently through decision making

Here are some universal thoughts that would be on my mind regardless of what type of company you run:

• What is absolutely essential vs. nice to have?
• Which customers are coming up for renewal?
• What’s the health of our pipeline / how has it shifted?
• Which vendor contracts are coming up - how do we optimize?
• What’s the right org structure for the current state?
• Who are our top performers and have we secured them?
• Am I managing investor expectations appropriately?
• Have I communicated with key partners / built in redundancy for any weak links in my ecosystem?
• Are we managing working capital (cash in vs. cash out)?

IV. ACT: Put the plans in motion

This is where culture and leadership matters. When you readjust the plan (if you have to), it needs to be communicated with transparency and context. The worst thing to do in this time period is have ambiguity linger. It’s time to reinforce the mission, give a realistic outlook on how you can storm the tide and provide a vision on how the company will endure in the long term.

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However you internalize O-O-D-A for your own context, it’s important that you move fast. Downturn environments have a lot of foundational layers that linger underneath and then tend to emerge quickly (see: public markets).

As it happens you want to be proactive vs. reactive. These environments are hard. There’s no two ways about it. Great people lose their jobs and companies that otherwise may have made it fold.

But these environments are long term positive. They breed resilient and healthy companies. They are also incredible opportunities to strike hard and fast and go on offense if you’re able to.

Use this period as a forcing function to build sustainability and endurance into your company.

Remember, in the end, the tortoise always wins. Not the hare.

Romeen

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