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Scaling in a downturn
Finance Insights

Scaling in a downturn: three keys to better business performance

Kolja Heskamp,
Kolja Heskamp Managing Partner at

It’s no secret that the startup landscape has changed. Interest rates and inflation have made cash more expensive, and buying power has decreased. Businesses have less easy access to cash, and so do your customers. 

Which means money isn’t coming in as quickly as it once was.

So what does this mean for founders and their finance teams? I believe that scale is still possible, and there is money to be raised if you can demonstrate certain characteristics. 

I’m lucky to work with founders and CFOs every day, to help them prepare for funding and sustainability no matter the weather. 

Here’s what we focus on with those startup leaders. 

Are we really in a downturn?

There’s a belief that what happened in the two years from mid-2020 to mid-2022 was the norm for startups. But it’s not. The result of the pandemic, a shift in purchasing behavior, and continued low interest rates created an artificial situation for scaling businesses. 

People are fixated on the “cold” VC market, but funding volumes are essentially where they were in 2019 and early 2020. The time from mid-2020 to mid-2022 was most likely an aberration – there was no due diligence and founders were getting to term sheets in two weeks. 

But we do have very high inflation and tighter pockets today. A lot of companies that did raise funds in 2021 are struggling to get back to that level. They don’t want to receive a down round, and investors are applying far more scrutiny. So if you do need to raise, it’s certainly harder than it was the last few years. 

And it’s not just for VC-backed startups. Investors in venture capital, family offices and more traditional investors have had to adjust their own portfolios, and they haven’t been able to spend in the same way on venture capital. 

So is this a down period? Possibly, but I prefer to think of it as a pendulum swing. Before the pendulum swung too far towards growth at all costs, and now it has maybe swung too far in the opposite direction.

It will probably settle somewhere in the middle, and we won’t return to hypergrowth for everyone.

Three focal points for the present moment

Working with hundreds of clients, you see the patterns and core challenges faced by most. Every company is different, but we see the same issues time and time again. 

And the good news is, getting these right will help you at all times, not just when cash is tight. 

Sound unit economics

It’s not sexy but it’s true: if you have a superior product, sound unit economics, and an imaginable road to profitability – if you’re capital efficient – you don’t have problems raising money as long as you are targeting a big enough market. There’s still higher scrutiny, but investors want to grow their portfolios with companies that have a clear path and margin structure.

Scaling today is all about capital efficiency: how efficiently can you bring a customer in? You’re looking at customer lifetime value (LTV) over acquisition costs (CAC) – that’s one aspect of it. And then the payback period – how long it takes to recoup those acquisition costs. 

Outside of sales and marketing, there’s also the cost of delivery. For SaaS companies, that’s pretty straightforward. We have a lot of benchmarks available. But the more hardware-driven, or the more innovative your company, the harder it is to benchmark. If you have big cash requirements to produce goods, the funds are more scarce at the moment.

Obviously we also care about churn. And gross revenue retention is now extra important – more than net revenue retention. With net revenue retention, it’ll look good if you keep adding customers – even if you’re losing them at the same time. Looking at gross means you really have to have a viable product or service that keeps people happy. 

Synchronous cash conversion cycles

Since the focus was on pure growth for so long, companies overused discounts and favorable payment terms. But you still needed to procure people and hardware – you still had costs. So CFOs had to stretch out their payback periods. Which was fine as long as you had funding behind you. 

Now the cash conversion cycle is much more of a priority. How does the money flow out match the money coming in? Where these flows overlap, that’s your working capital. That’s the most natural conversation in the private equity world. Every PE-backed company knows how this works. But venture capital funds and founders alike have put little focus on it at times. 

I try to educate clients and investment funds around cash conversion cycles – how do your payment terms work and do you manage working capital well? When money was loose you could keep raising and then keep acquiring customers who may not have had long-term viability. People are looking at this a lot more now. 

For finance teams, this means strict focus on the P&L, and on cash. For the whole business. And this involves talking to every department head. 

You don’t even need to think in terms of money. You can use days, you can make it visual, and really make it comprehensible to the whole business. It’s a very communication-heavy topic, because if sales are still offering ad hoc discounts or you lack the tool and data infrastructure, it won’t work. 

But once you make it core to the business, this is where the best companies emerge. The revenue engine becomes more effective, with hardly any costs in the background. And you can really scale. 

A spotlight on pricing

Recently I’ve spoken with many founders and revenue leaders about their biggest lessons or regrets in recent years. The one that keeps coming up is, “I wish I would have taken pricing more seriously. I wish I would have seen the full value we offer.” Not the fundraising rounds or the company valuations. 

It’s incredibly hard to raise prices. And it really should be a process: you should consistently revamp your pricing structure. But robust pricing early on usually comes at the expense of early growth. You will obviously lose out on some of the quick deals. 

This also reflects the idea that many founders have of “land and expand” with new customers. Just get them in the door, and they’ll upsell and grow as a customer. But founders are typically overly optimistic here – it doesn’t happen as often as you’d like. 

At the same time, it’s completely fine to hire or build functions based on future need – as long as that need is inevitable. It makes sense to hire a full-time customer success agent even for only a few customers at first, because you’ll clearly need the function as you grow. This will get cheaper at scale, but the current cost still explains itself. And in the model you can calculate that in advance before the thousands of customers come. 

Is revenue no longer a focus?

To be clear, the main driver for growth in the early stages is revenue. You need to have this. And you can’t be optimal from day one. But you can aim for strong unit economics. 

You can identify the right customers early on, rather than going after everyone imaginable. You can avoid those small, labor-intensive tickets, even if you might have the bandwidth to handle them at the start. Dare to focus on the ones who are going to deliver for you in the long run. 

I think most VCs today would rather look at companies that took a little longer to hit €100,000 or €1M ARR, but there’s real substance there. Because then they can harness that value and kick off hypergrowth. 

Build with purpose

This economic shift requires startup leaders to look at their principles. What is the purpose here? Do you just want a lottery ticket? Or maybe you just want a hell of a ride. In those cases, you need hypergrowth. And that’s going to be hard.

But if you have a real value set, and making money is a consequence but it’s not “billionaire or broke,” then the right approach is to build a company. Build a company based on performance, delivering value, and with realistic costs. You can’t just be Robin Hood and use your company to subsidize customers with VC money. 

When you burn money it should be with real purpose: to enter new markets or to innovate. And this should come from your fixed costs. If you’re burning money after delivery, I don’t see that as creating value for yourself, your investors, or society. 

The best thing about working with founders and their teams is the sparkle in their eyes. It’s wonderful to see them picturing how big a project can become. That’s a real benefit – otherwise founders wouldn’t go through all the hard parts that come with building a business. 

Please always believe in that vision moving forward. If we didn’t have dreamers and big picture enthusiasts, we wouldn’t have new businesses. And that would be a terrible thing. 

But how you approach your financials and what you emphasize will make a difference in your ability to reach that vision.

About the author

Kolja Heskamp is Managing Partner at, a consulting firm for fast-growing companies. focuses on providing “Stability-as-a-Service” – helping clients create secure, stable financial processes with the right tools and a well-structured back office. 

Kolja and have helped to structure 350+ companies (from hardware to SaaS) and to raise over €700M in funding.