Tips For Navigating A Downturn As A Founder & Marketplace Startup

So you've been through a time period with Trulia in the past, 2008, and quite the time to be building a marketplace in the housing market. So I'd love to chat about, given everything going on today and some of the factors, how you think through in there, maybe even talking with some of your portfolio company founders on how to think through what we're going through.

Yeah, I mean, we've sort of been drifting down for the last 4 months. And so, and it feels in the last couple of weeks, it's kind of like, okay, yep, no, this is not a sort of like negative sentiment. This is sort of negative reality. And, you know, the way that, you know, the framework that, that I use And we wrote about this at the sort of the pandemic about 2 years ago, was really thinking about it in 3 buckets. So one is really kind of being real with the challenges you have. And, and that you could think of this as sort of playing defense. And so that means, you know, it's gonna be very hard to raise money in the— or harder to raise money in the foreseeable future. And if you don't have great traction, great product-market fit, then you really have to focus on your cash position. And so really, and thinking about, okay, how do you, how do you optimize your cost structure? for the go-forward plan. And this is, you know, probably, this is most typical for kind of, you know, the defense is where you have potential losses, right? You're kind of like serious seed, A, B company, already have funding, you already have cash. But really just being real, the old plan is the old plan, there needs to be a new plan. And you need to kind of accept reality and just be singularly focused on the cash position and make sure you give yourself time to be able to either become profitable, or to be in a position where you can raise the next round of financing. And financing is getting done, you know, they're getting done. We closed— we're closing deals every week. You know, the venture markets are cooled off, but they're not shut down. The second piece is really leaning into the opportunity. So playing offense. And, you know, it's sort of, it's been, it's been said many times, you know, I think it was like Chesky was, was tweeting, like, you know, the best time to build a company is in the downturn. That's true, it sure doesn't feel like it. So it's really hard. But it is true. that, you know, everything's cheaper, less competition. But most importantly, in these sort of economic shifts, there are typically, and particularly for marketplaces, there are supply and demand imbalances. So I mean, we saw it sort of very, very clearly in the pandemic, like, everyone was at home. And they were looking for substitutes for their kind of normal activities. So Instacart, DoorDash exploded in volume, Peloton exploded in volume. And that, you know, some of them capitalized it on, I think, extremely well. DoorDash and Uber Eats, kind of most principally with, with food, and then use that to build a scale in their marketplace that continued through. And you, you are, you know, where there's this change, there's this opportunity. And so if you look at these, these market shifts, they typically are kind of, you know, in, in a normal economy, there's supply-demand balances, new marketplaces, existing markets crop up, that basically look to match supply and demand. If you suddenly have a massive seismic shift in the economy, or geopolitically or something else, then you, you see this might supply-demand imbalance. And so marketplaces come in and try to kind of try to match that new supply or that new demand in a more effective way. And that, you know, very quickly can give you a tactic to solve the chicken and egg problem, the cold start problem that you can, you can utilize very quickly and very efficiently. It's amazing the velocity at which things explode. I mean, we, you know, Clubhouse being a sort of example exploded, but then it, you know, fizzled. You know, but that, but things can spread very, very quickly when there is, when you have this supply-demand imbalance. So that's just being, you know, being opportunistic and being aggressive. Because you are, you know, that as a founder, as a startup, Your single best, your single strongest tactic is your speed. And you have no real incumbency challenge or innovator's dilemma. You can look at it and say, like, well, I'm just going to go over here. And this is where the opportunity is, I'm going to hibernate this old business, this is the opportunity, I'm going to attack it really hard. And then the incumbents are typically you know, too slow, or just not able to react to the reality. So that's the, you know, the second piece and really being, being opportunistic and playing offense. The third piece is really about managing psychology. Like I said, it's like, it's easy to say these are the best times, doesn't really feel like that. Because you're, you know, you're running on fumes, you've just let a third of the team go, whatever it is, you're like, You're worried about not making payroll in X months' time. It's like, this is really hard. And so really thinking about how do you manage your own psychology, how do you manage your team's psychology, and you need to up your— up how you think about that from a communication perspective, from a culture perspective, from a personal perspective. Because it's, um, it just got a lot harder. And so, um, uh, that's the framework. I wrote a— I wrote this article which maybe someone could send around the chat, but, um, I think it's 28 Moves. Um, and, uh, in that pre-chat you were saying like, how, how would that be different? Like, what, you know, what would be— and I was reading through it a couple of weeks ago just because I was feeling the tea leaves And I don't think, I don't think that different. You know, that I don't think there's that much difference in that a lot of the perspectives from this were born out of pre-pandemic economic shocks like the one in 2000, the one in 2008. And while there's a lot of references to pandemics, or pandemic, you know, they're really about how, how to navigate those experiences. From what I'd seen in the portfolio and also elsewhere in, in, in, in 2000, 2008. I guess one of the differences, it feels that— and we'll see where it ends up, but it feels like— I mean, I vividly remember in There were a couple of like major catalysts for kind of, you know, in 2000 and 2008, and you saw kind of Lehman collapse and the stock market go down massive amounts. Then you saw in, you know, dot-com, the dot-com collapse. Here it seems to be like multiple, multiple fires going on at the same time. and no major shock, which you could see yourself out of it. The pandemic was really severe, but actually economically quite short-lived, whereas this feels like it might be longer and more complicated. There's war, there's inflation, there's rates, there's oil. You know, I'm not a macroeconomist to really know how it's going to end up. But I was surprised how quickly things came back in 2000. I'm probably feeling less optimistic this will be— this might be more similar to kind of 2008 in its longevity, or sort of 2000, 2002. Sorry to be the Negative Nelly. on this, but I think, um, uh, I think that's just the reality of where we are.