It’s been an interesting year for the tech industry, with lots of changes in terms of growth strategies. While VCs were highly supportive of the growth of new technologies adoption, even at high costs, they are now much more conservative if the payback is not short enough (e.g. less than 18 months in SaaS industry). Why is that, you ask? Well, the increase in interest rates has led to lower valuations for public tech companies, and private ones that are valued on ARR multiples have followed suit. So, what does this mean for tech companies? They’ll need to reduce their burn multiple to achieve similar ARR growth if they want to maintain similar valuation trends.

How do you manage such a switch as a CEO? Regardless of the macro-environmental context, your first role is to set and communicate the vision, mission, and values of your company. Make sure your team hears it so often that they can’t get enough! At Spendesk, our CEO repeats it in his Monday morning video and during our weekly All Hands.

While your financial statements may need to adapt to the external context, they’re not the goal in themselves. They are merely a means to achieving your north star KPI that quantifies your vision (e.g. XBn€ spend operated through the platform for Spendesk).

As a CEO of a VC backed company, you may find yourself in the situation of shifting your company’s focus for financial reasons, which can be a complex and challenging process with significant change management requirements. Think of it like moving to a new house or starting  a new job. Change can be scary or exciting, depending on how you perceive it. It is important to prepare for the change, implement it and then ensure its sustainability within the organization. I want to emphasize the importance of engaging with employees and stakeholders throughout the change process to foster a sense of ownership and commitment. Pierre Fournier very well illustrates two contrasting financing approaches to support growth in his fable “The Fable of the Bootstrapper and the Fundraiser”. Don’t worry, though – your reality falls probably somewhere in between!

Let’s move you forward with some actionable steps. Here’s what I suggest:

First things first, you and your leadership team need to review your plan and be bold about what really matters in the short term to support your long-term vision. Let’s break it down into three dimensions:

1. Focus on the core markets where you’re clearly winning and have confidence that you’ll displace competitors in the long term. Winning can mean several things, such as strong topline growth or robust unit economics.

2. Keep testing the product-market fit or business model in investment markets.

3. Cut out the markets you don’t want to be in and let your competitors focus on them.

Remember, a market can be a geography and/or a customer segment (industry vertical and/or company size). Your re-forecasting exercise should treat each of these buckets differently: budget a clear pathway to profitability for core markets (1), be ruthless about cutting out what doesn’t work in (2), and radically cut out (3) altogether.

Your second action is to align the extended leadership team on this shift and get their commitment to execute the reviewed plan. This is not an easy one! Such change can sometimes be tough for your leaders as they can be very used to “growth at all costs” environments for decades and their first reflex can be misaligned with the reviewed constraints. 

Anyway, this step is mandatory to lead the organization in the right direction. At Spendesk, we have put in place an operating philosophy with required forums to enable the extended leadership team to get informed, to take action, and make decisions (cf this article).

To ensure the team is well equipped to execute the reviewed plan, you need to rely on your operating principles and illustrate them in this new context. It’s easy to become too reactive, and when that happens, you’ll inevitably start to make human resources mistakes, execution mistakes, prioritization mistakes. This is why you need to document core tenets describing the way you work. Once they’re written down, you need to repeat them constantly until everyone has internalized them. Many companies have “values,” but I want to distinguish philosophical beliefs from the concrete principles that should be applied to the day-to-day work of running your business. Check out Patagonia’s principles or Twilio ones as a concrete example.

Next, over-communicate the plan with your employees and equip your managers to be strong relays in the organization. Spend time doing focus groups, coffee chats, and large Ask Me Anything sessions. It’s a great use of your time and will keep everyone on the same page.

This is a lot! The key is pausing just long enough to be very intentional about how you will collectively approach the new phase. The good news is that as CEO and founder, you are in the unique position of building the organization custom to your leadership style and overall skillset to make the change happen!