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7 Principles for CFOs to Survive The Current Bear Market

Michael Miao
Michael Miao Partner, IVP

The current macro economic environment, and how it is affecting growth company valuations, fundraising and growth, is an important topic for CFOs nowadays.

To address some of the most pressing questions, my colleague Ajay Vashee and I created a presentation for 20 leading growth-stage CFOs to help them navigate the current downturn and emerge from it stronger than ever. Here are the takeaways from that event. 

The current market conditions present a new set of challenges for founders and CFOs. To survive this period and emerge stronger, you must shift focus.

1.  Maslow’s hierarchy for growth-stage CFOs

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The first priority is runway, followed by maintaining durable growth in the core business. Growth may not be rewarded as much as it was previously, but it remains critical.

And the best companies are always investing in the needle-moving Act II. Once cash runway and durability of the core business are secured,  you need to think about what will take you to the next growth chapter. Profitability comes later.

 Do all the above well, and you give your company a shot at becoming an enduring market leader.

2. Prepare for a lengthy downturn

Market downturns last around three years on average, and the median market crash takes 17 months to bottom and lasts 38 months from start to finish.

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We’re only about 12 months into this current cycle, so it's unlikely we’ve reached the bottom yet. And the recovery will be much slower this time (more on that below). 

Manage your runway carefully and protect the cash you have; raising funds in the near future will be possible, but often on different terms than what you’ve seen in the recent past (more on that below as well).

3. Watch out for false rallies

Expect multiple false rallies on the way to the bottom. Previous crashes have shown us that markets can recover significantly over a short period of time and then swiftly lose all of those gains and more.


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During the Dot Com Crash, there were five separate NASDAQ false rallies where the market rallied 20-45% before reaching the bottom. We just saw a false rally in the summer of 2022. Expect more before reaching the bottom this time.

4. Expect a slow recovery

The current bear market is different from the recent crash and recovery in 2020. There, governments made short-term monetary and fiscal policy decisions to counter what was seen as a short-term problem - the Covid pandemic. 

In the US, the Federal Reserve intervened with massive amounts of quantitative easing and stimulus initiatives, which drove a quick recovery but triggered rampant inflation.

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The Fed can’t come to the rescue this time with additional QE, given the current inflationary environment. Its balance sheet has grown too large, and the previous round of QE was largely responsible for the inflation we see today. 

This downturn will likely be more protracted.

5. Expect slower revenue growth

Revenue growth decelerates in a market downturn. Publicly traded enterprise software and consumer internet companies massively decelerated during the Great Financial Crisis. This happened during the Dot Com Crash as well. We expect history to repeat.

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We are already seeing the impact in the public markets. Fewer beats and raises for software companies in Q2 vs Q1, and many companies are lowering guidance for the year. If it's happening in the public markets, it's likely happening more acutely in the private markets.

According to Morgan Stanley, 95% of these software companies exceeded expectations for Q1. Yet only 55% raised expectations as a result. And in Q2, more lowered expectations than gained. 

6. Be highly realistic when raising funds

There is still money in venture capital. Dry powder remains at an all-time high - nearly $300B. 

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The difference between 2023 and 2021 is the terms. First, capital will bias toward earlier-stage opportunities and support for existing portfolio companies. Deployment cycles will also extend as VCs have a tougher time raising from LPs.

For later-stage companies, the term sheets and valuations will be much less favorable than even at the start of 2022. VCs are looking for either smaller or safer investments, so you’ll need to show very strong unit economics and clear growth. 

Or be prepared to accept a term sheet you’d otherwise normally walk away from.

7. Don’t cut today what you’ll need tomorrow

A true bear market takes its toll on most businesses. But there will be life after the bear, and the companies that bounce back fastest have the best chances of succeeding. 

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Take a surgical approach to cost cutting: a surgeon removes only what’s necessary, and does their best to leave the patient with a short and smooth recovery. 

CFOs need to identify the strategies and projects that either bring little to no revenue, or do so highly inefficiently, and reduce costs there. But it makes no sense to cut 15% across the board if that includes 15% of your best employees that directly impact product or revenue.

And you certainly don’t want to create space for new and existing competitors. 

All of this in the context of your hierarchy of needs from the first section. If your runway is dire, major cuts may be required. If the runway is fine, your cuts should optimize growth, and potentially even keep room for new innovation.

In summary, the best CFOs will follow these principles:

  • Remain conservative about next round and runway

  • Curtail inefficient spend, without over-rotating on profitability

  • Ensure core business is on a durable growth trajectory

  • See a golden opportunity to invest in new products and initiatives

  • Exit the downturn with a well-developed strategic finance muscle

About the author

Michael Miao is a Partner at IVP. IVP is a venture capital firm having invested in over 400 companies, 131 of which have gone public. It specializes in helping management teams evolve and using strategy and capital to realize a company’s full potential. 

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