M13's Karl Alomar: 6 Strategies for Leading Startups in a Downturn

On October 21, 2011 at 10:20 a.m., I joined more than 8.5 million other Californians for the Great Shake Out, an annual earthquake preparedness exercise. Four hours later, the Bay Area was rocked by an earthquake that measured 3.9 on the Richter scale.

Even though we had just been trained for this exact scenario, many co-workers didn't know how to react: some panicked, others prepared for the doors, and a number of people simply ran for the exits .

When the unexpected happens, no one knows how they will react. This also applies during downturns. Many new founders think they know where to look first to save money or how to pivot, but as the saying goes, no plan ever survives first contact with the enemy.

Basic best practices won't help your business endure this winter, so I invited M13 Managing Partner Karl Alomar to join me on a Twitter space to discuss the following:

Use "ruthless prioritization" to find evidence points Investors still expect 'healthy growth' Why Founders Need to Secure 24+ Months of Lead How to talk to your investors about pivoting When it's OK to leave money on the table What you need to do differently to fundraise in a downturn

Based on his time leading startups during the dotcom implosion of 2000 and the Great Recession of 2008, Alomar said it was critical for founders to be strategic, not reactive.< /p>

To get funding right now, you need to be a significantly better business. Karl Alomar, Managing Partner, M13

Whether or not you feel like a leader, "the decisions you make in your business are going to affect everyone who works for you, so you need to be able to manage and communicate very effectively with all those stakeholders ", he says.

Use "ruthless prioritization" to find evidence points

Alomar said M13 is working with founders to identify "points of proof" companies should counter before launching their next round.

"There's a difference between proof points, which are things you have to build between rounds, and just validating the quality of the business," he said. These criteria vary, but can include product-market fit, engagement metrics, or specific initiatives that will help achieve business goals such as ARR or usage rate.

“If you are a fintech company, you need to ensure that there is a good supply of capital. If you are a hardware company, you need to ensure that there is clear evidence that supply chains work,” he said.

In this normalizing market, Alomar said investors are looking for startups that make "incremental" improvements to reduce risk from previous investments. Therefore, everything is to be taken into account, including the composition of the management team itself.

“There are companies where you feel like the founders are the right people to develop them until they reach real stages of growth,” he said. "So if you've just had a round [of investing] and you have a fantastic founding team, you may not have management proof because people may already believe in your team. .

But if you have a great idea and everyone feels like there's a lot to mature in the business, one of your proof points might be, "Hey, we need to build a team of leadership capable of taking this business to the next level.'"

Investors still expect 'healthy growth'

Despite the slowdown, Alomar said investors have not lowered their early-stage growth expectations.

“Right now, you really need to perform better, more efficiently, more effectively,” he said. "To get funding right now, you need to be a significantly better business."