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 :

  1. 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.

  2. 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.

  3. 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.

  4. 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?