Preparing For A Downturn—A Fintech CEO’s Take


“If opportunity doesn’t knock, build a door.”
– Milton Berle

How should entrepreneurs and investors prepare for a future downturn?

The economy always operates with opposing forces. It’s expected that there will be downturns and upturns. Entrepreneurs and investors can find opportunities to prepare, possibly flourish, and possibly fall apart, if not ready to deal with the dark and the light.

Entrepreneurs need to be realistic about what they can accomplish with their team. The reality is that unless you have an incredibly profitable company, you must run your business on velocity. A good way to do this is to create three financial models: best case, medium case and worst case. Be true to the business when creating your models, and keep it honest when mapping out each of the possible outcomes. Optimism is intrinsic, but in the real world, market forces cannot be controlled.

—In the best case, you operate as normal, and if you are doing great, then invest in the business. This might be a great opportunity for you to take a market lead if you aren’t already doing so.

—If you are operating in the middle case, work to create more runway for the business. This is accomplished in three ways: raising capital, cutting expenses, or bringing in more revenue. They all come with related challenges, but are crucial for success at different stages of a company’s growth.

—When operating in the worst case, cut expenses. This is hard. It forces you to make tough choices, and it’s where you, as the entrepreneur, are challenged on many levels. The worst case is about leadership, and it will test you beyond what you initially signed up for. However, this is why you’re the CEO and, more importantly, why you have a great leadership team. You just need to get it done.

I’ve built three companies and have stepped up and stepped through all of these cases, and have become a better CEO for doing so. A downturn can bring lots of opportunity. The market may turn your way, or your competitors may stumble. Take advantage of this time, regardless of which case you are operating in.

In a downturn, investors need to triage. Not all investments can be zingers, so investors can also create best case, middle case and worst case models.

—In the best case, portfolio companies probably need the least amount of attention. They clearly have achieved product or market fit. They are well-led and well-managed companies. It’s best to stay out of the way.

—The middle case is where investors should spend the most time. These are the companies that deserve the most attention to help reach their full potential. These businesses need support and capital.

—For the worst case, these companies need moral support – this is about great leadership and less about capital. Investors need to believe that there is either enough velocity here or not, and make choices that are best for the company. In the worst case, both the investors and the company leadership have a fiduciary responsibility to make the right moves; it’s critical.

Based on my experience building three companies through the dot com boom and bust as well as the great recession, I can tell you that opportunities abound in a market downturn. Some of these opportunities are professional and others are personal. It will test both entrepreneurs and investors to the best of their abilities. If you’re prepared with financial models for the best, middle, and worse case scenarios, I believe you can come out of it for the better – regardless of the outcome.

Jason Gardner is founder and CEO of Marqeta, a San Francisco Bay Area based developer and provider of innovative payment processing technologies that power physical card, virtual card and tokenized card solutions. Follow @jmgards

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