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Leading Through Uncertainty

Surviving a downturn requires fiscal responsibility—and a strong leadership team.

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By M13 Team
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April 19, 2020
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2 min

talent & leadership

M13 has been purposefully designed to help founding teams execute better and more efficiently. We describe M13 as a venture engine because our founding teams get access to not only our capital but also our network of partners and business leaders and our vertical expertise. Our Partners embody the spirit of #BrighterTogether with their unique talents and hands-on operational backgrounds.

With our community members working remotely and dealing with these extraordinary times, our partners began hosting webinars that unpacks current leadership issues and challenges. The most recent one focused on navigating and leading early-stage startups in uncertainty and was moderated by M13 Partner Latif Peracha.

M13’s investment focus is on understanding new consumer behavior, and we’ve built a portfolio of companies that lean into this thesis. COVID-19 is accelerating some of these behavioral trends that we believe will become permanent shifts.

Latif was previously managing director at Virgin Group and managed both its venture strategy which included investments in Ring, Slack, Capsule as well as Virgin’s U.S. portfolio of companies including Virgin Galactic and Virgin Hotels. Latif and the rest of our investment partners continue to deploy capital while prioritizing the health of our teams and portfolio companies.

Despite the unfortunate circumstances, M13 is designed for this kind of changing macro environment. M13 is focused on execution and in a world where capital markets are tight, there will be a premium on execution.
Latif Peracha

Meanwhile, M13 Partner Karl Alomar started his first company in the late 1990s and ran companies that survived two global financial crises. In 2000, the market crashed on the day Karl was expecting a wire of $20 million; that wire never transpired and yet 60 days later he was able to sell the company. Then he headed up a fintech business in China when the credit freeze happened in 2008; although the company realized an incredible burst in demand and growth opportunity, it faced challenges that limited its ability to service its customers. While reflecting on 2000, Karl shared three sensible reminders to prepare for a downturn:

When someone looks under the hood, they need to see a real business. In 2000, our business model was admittedly shaky. To navigate to a sale meant restructuring to an economically viable business model. We made a leaner operating model and reconstituted how we did business.

Execute difficult decisions swiftly. In 2000, we looked at options to ensure recapitalization and longevity of the business and decided to pursue the route of acquisition despite a comparatively depressed valuation. Within a few days, it was clear that to allow for this we had to extend our runway by a few months, and as such let go of 30% of our staff. It was the most emotional and difficult part of the experience but we executed it swiftly and smoothly we acted quickly and then focused on making sure the remaining team had security and the opportunity to get through the cycle. It was tough.

Surround yourself with thoughtful advisors. The quality of the people around you and their guidance and support is paramount to your ability to navigate. Try to build a base of advisors while building your business so they get familiar with it and so you aren’t stuck with panic and bad advice and have to get people up to speed when things get challenging. In 2008, we were blessed with a world-class board of directors that stood by the business and used their influence wherever necessary to help navigate the troubled waters the business was facing.

Latif and Karl identified macro similarities to today’s economic and health crisis, shared operational approaches to enduring this restrictive business environment, and answered questions from investors and founders alike. Their key takeaways to surviving a downturn:

Stay calm. A calm attitude will reduce the likelihood of knee-jerk reactions or taking generalized sweeping pieces of advice.

Be strategic. Take a step back, and take a strategic review of your business. Figure out how the downturn will impact your supply chain, your demand, customer behavior, and the world after the crisis is over. Strive for a balance between offense what you can lean into that provides opportunity and growth and defense, which are ways you can protect and preserve financially.

Avoid hibernation. Figure out how to keep the ball moving forward, and avoid flatlining even if your business is pulled out from under you. Think positively about what you can do to drive momentum. Recalibrate your focus and what you’re doing so the business can maintain energy.

Show fiscal responsibility. The first three actions are part of the considerations to fiscal responsibility. You’ll be able to see more clearly the areas to pull back and areas that may create revenue. Focus every decision on how it impacts your growth. Extend your runway as much as you can without hindering growth.

Build a support mechanism. As mentioned earlier, surround yourself with strong calm actors before you start building your business. A solid and supportive board and a strong management team pays dividends don’t get pushed in bad directions with bad advice. M13 aims to be that for our founders.

Watch the full webinar to hear Karl’s reflections and lessons learned, plus Latif’s insights on macro conditions.

M13 has been purposefully designed to help founding teams execute better and more efficiently. We describe M13 as a venture engine because our founding teams get access to not only our capital but also our network of partners and business leaders and our vertical expertise. Our Partners embody the spirit of #BrighterTogether with their unique talents and hands-on operational backgrounds.

With our community members working remotely and dealing with these extraordinary times, our partners began hosting webinars that unpacks current leadership issues and challenges. The most recent one focused on navigating and leading early-stage startups in uncertainty and was moderated by M13 Partner Latif Peracha.

M13’s investment focus is on understanding new consumer behavior, and we’ve built a portfolio of companies that lean into this thesis. COVID-19 is accelerating some of these behavioral trends that we believe will become permanent shifts.

Latif was previously managing director at Virgin Group and managed both its venture strategy which included investments in Ring, Slack, Capsule as well as Virgin’s U.S. portfolio of companies including Virgin Galactic and Virgin Hotels. Latif and the rest of our investment partners continue to deploy capital while prioritizing the health of our teams and portfolio companies.

Despite the unfortunate circumstances, M13 is designed for this kind of changing macro environment. M13 is focused on execution and in a world where capital markets are tight, there will be a premium on execution.
Latif Peracha

Meanwhile, M13 Partner Karl Alomar started his first company in the late 1990s and ran companies that survived two global financial crises. In 2000, the market crashed on the day Karl was expecting a wire of $20 million; that wire never transpired and yet 60 days later he was able to sell the company. Then he headed up a fintech business in China when the credit freeze happened in 2008; although the company realized an incredible burst in demand and growth opportunity, it faced challenges that limited its ability to service its customers. While reflecting on 2000, Karl shared three sensible reminders to prepare for a downturn:

When someone looks under the hood, they need to see a real business. In 2000, our business model was admittedly shaky. To navigate to a sale meant restructuring to an economically viable business model. We made a leaner operating model and reconstituted how we did business.

Execute difficult decisions swiftly. In 2000, we looked at options to ensure recapitalization and longevity of the business and decided to pursue the route of acquisition despite a comparatively depressed valuation. Within a few days, it was clear that to allow for this we had to extend our runway by a few months, and as such let go of 30% of our staff. It was the most emotional and difficult part of the experience but we executed it swiftly and smoothly we acted quickly and then focused on making sure the remaining team had security and the opportunity to get through the cycle. It was tough.

Surround yourself with thoughtful advisors. The quality of the people around you and their guidance and support is paramount to your ability to navigate. Try to build a base of advisors while building your business so they get familiar with it and so you aren’t stuck with panic and bad advice and have to get people up to speed when things get challenging. In 2008, we were blessed with a world-class board of directors that stood by the business and used their influence wherever necessary to help navigate the troubled waters the business was facing.

Latif and Karl identified macro similarities to today’s economic and health crisis, shared operational approaches to enduring this restrictive business environment, and answered questions from investors and founders alike. Their key takeaways to surviving a downturn:

Stay calm. A calm attitude will reduce the likelihood of knee-jerk reactions or taking generalized sweeping pieces of advice.

Be strategic. Take a step back, and take a strategic review of your business. Figure out how the downturn will impact your supply chain, your demand, customer behavior, and the world after the crisis is over. Strive for a balance between offense what you can lean into that provides opportunity and growth and defense, which are ways you can protect and preserve financially.

Avoid hibernation. Figure out how to keep the ball moving forward, and avoid flatlining even if your business is pulled out from under you. Think positively about what you can do to drive momentum. Recalibrate your focus and what you’re doing so the business can maintain energy.

Show fiscal responsibility. The first three actions are part of the considerations to fiscal responsibility. You’ll be able to see more clearly the areas to pull back and areas that may create revenue. Focus every decision on how it impacts your growth. Extend your runway as much as you can without hindering growth.

Build a support mechanism. As mentioned earlier, surround yourself with strong calm actors before you start building your business. A solid and supportive board and a strong management team pays dividends don’t get pushed in bad directions with bad advice. M13 aims to be that for our founders.

Watch the full webinar to hear Karl’s reflections and lessons learned, plus Latif’s insights on macro conditions.

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The views expressed here are those of the individual M13 personnel quoted and are not the views of M13 Holdings Company, LLC (“M13”) or its affiliates. This content is for general informational purposes only and does not and is not intended to constitute legal, business, investment, tax or other advice. You should consult your own advisers as to those matters and should not act or refrain from acting on the basis of this content. This content is not directed to any investors or potential investors, is not an offer or solicitation and may not be used or relied upon in connection with any offer or solicitation with respect to any current or future M13 investment partnership. Past performance is not indicative of future results. Unless otherwise noted, this content is intended to be current only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in funds managed by M13, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by M13 is available at m13.co/portfolio.