2020 was just a test...
Chance favours only the prepared mind
My twitter feed is full of mega rounds, tremendous returns, realised performance. hype, energy, velocity hit everyday an all time high.
We’re going through a tech prime time. The amounts invested are growing faster than companies can absorb them, bank accounts are full, the valuations are without a doubt two to three times higher due to the pre-emptive behaviours that are ruling this massive influx of cash.
With abondance comes extremes, in terms of expectations, velocity, hiring rates, burn rates, living rates... It all inflates. Unfortunately, extremes aren’t sustainable, scarcity always ends up hitting hard to balance the pace of humanity.
This being said, I believe that our fundamentals are strong. Tech companies are growing fast, building real solutions, delighting customers and bringing real money home. Trillions going into high valued, fast growing, yet cash-burning tech companies are ten times better invested than trillions going into leveraged derived assets.
However, when casino night will be over, there won’t be only winners. Investors won’t be able to commit everywhere anymore, they will fill their rescue boats with the top quartiles and leave the rest behind. Sharks will come around and eat them. I am even wondering if some limited partners (investors of funds) will default ?
It always gets ugly. Remember that chance favours only the prepared mind. 2020 was a relatively short full-scale test, followed by a great rebound, an opportunity to touch bottom, explore our boundaries and test our ability to act upon a disastrous event.
We should not rest and take this opportunity to reflect on our ability to get really prepared when it will really hit ! Here are a couple of takes, happy to read yours in the comment :
If you act like the party is already over, you will look like either a coward or a walking dead and you will be left behind when it will hit the fan and that triage will start. Keep investing, keep pushing.
Priority number one is always a very strong product market fit. If you feel like you’re working on a vitamin pill, your product will disappear from your customers’ shopping list by the time they cut their costs. Build something people really need and want.
Cash is a luxury that tends to impact negatively the ratios between the number of people, their costs and their results. Make sure you get the most out of your team.
Burn cash, save cash. Companies get ultra-capitalised. Be mindful of using the cash wisely. It doesn’t mean to save it all, neither to burn it all. Invest to hit your goals in due time, be prepared for a change of plan.
When I engage with founders at the moment, beyond their talent, ambition and work ethic, I am a lot more diligent on assessing their grounded approach of things, their self-awareness and their pro-active resilience. I believe those qualities will allow them to thrive through both the noise and the turmoil that will eventually hit us someday…
What’s your take?
Insightful. It is indeed staggering to read on valuations, new tech developments etc, on one hand on the other - I have to say "Its about time, that we in Europe became a little more gutsy, and bolshy" as the counterparts in Silicon Valley. That said, there is still a hierarchical approach, on where (whom) funding is divested to, whereas in SF the view is less myopic...Sure, we can opine that it all boils to do "product/market fit" and you made a good comment here
"Priority number one is always a very strong product market fit. If you feel like you’re working on a vitamin pill, your product will disappear from your customers’ shopping list by the time they cut their costs..."
In our case at Muldooneys we are building a luxury product - that will always have a niche market of appeal of consumers. True” luxury good where our leathergoods are valued because of its attributes: quality, craftmanship, our raw materials, the details, design, and most importantly integrating advanced technology.
Luxury never truly dies. There is always a demand even when there is an economic slowdown, but it is key though that our strategies are refined, and evolve with the changing times.
With Muldooneys 2.0 what I have done, is look to position ourselves where our main competitors (Luxury Giants) are weakest ie. in their supply chain.
1. This is an area of weakness primarily as: Luxury is built on selling a dream. Its exclusive premise is sold on its ability to control the information, communication flow, maintaining secrecy, in order to convey their "exclusivity" and "not for everyone" image. This justifies our veblen price positioning which increases roi in brand equity.
Why would we do this ? Well given that the biggest competitors we have are those that have stood the test of time. The longevity of that brand heritage (Louis Vuitton, Hermes, Gucci, Chanel etc) is in itself hard to ever be replicated, nor challenged.
20 years ago, we probably would have said – virtually impossible.
But, with secular themes like an ever evolving consumer demographics, disruptive new technology growth, upstarts such as ourselves have a unique opportunity.
Case to point, with Muldooneys 2.0 we have a :
1. Cost Advantage : Ours is a pre-order businessmodel; low market to entry (digital e-commerce business model) - which enables us to generate the same level of margins, with less the expense/cost of the large luxury brands;
2. Positional Value : By integrating new technology (Blockchain, A.I,) in the supply chain, building trust, transparency and including our consumer in a circular-end-to end business relationship. This technology enables us to improve our product performance with the information flow, whilst enabling us to acquire, and retain our consumer output, and satisfaction. With this transparent approach, we help build and confer that valuable brand legitimacy.
Added, with 6 limited edition product drops through the year, all in small quantities this augurs well as investment pieces for the consumer ROI, who was also part of the creation process from day one.
3. Structural/Scope : As a brand being revived with a more modern approach to luxury brand building - ie (just like a tech start-up bootstrapping) I have chosen to build a small, agile team of people, whilst outsourcing the bigger costs. This enables us to remain flexible, adjusting our technology to our product and market quickly, refining the "little trade secrets" whilst serving a niche market, for a long period of time. This in itself make's it hard for top tier luxury brands to replicate - due to their large behemoth structural disadvantages.
It's easy to become giddy with excitement with the big valuations. I too am guilty of that, but once you get a few hard knocks, reality starts to settle in. I have found that going back to the first blueprint, of the how and why I started out, helps bring back the focus on putting the plan in action first, before the ultimate end goal.
"If you act like the party is already over, you will look like either a coward or a walking dead" : C'est toujours le cas dans une bulle.
Le plus dur n'est pas de détecter son existence mais comment résister aux chants des sirènes et ramener une lueur de raison dans un monde hystérique.
L'histoire se répète : Crise - panique - reprise - excès - Crise - panique - etc.