If I were to characterise 2022 in 1 word, it is uncertainty. The confluence of opposing forces and the reversal of Covid-induced trends, mixed in with the cascading effects of geopolitical crises, means that the picture gets complex very quickly.
I entered 2022 on a hopeful note. Covid measures in Singapore were gradually lifting, we were starting to see our colleagues in person, and we were in the final stages of closing our Series D round.
Yet, the business environment turned quickly and quite unpredictably from Q3 onwards. Here are 3 lessons I picked up towards the tail end of a very eventful year.
- Profits over growth
Long gone are the days where we see startups raising at valuations of nearly infinite multiples of their revenues. I still remember the dislocation I felt reading about our US-based competitors raising billion-dollar rounds 2 years after their foundings. Their rapid ascent seemed unbelievable, given that we had been chugging along for close to 7 years. Even closer to home, funding news hit my timeline every few days.
Those news are now replaced by near weekly layoff and hiring freeze announcements, even amongst the seemingly untouchable ranks of the FAANG. Word on the financial street, and wise counsel from our board is that unit economics and operating efficiency are the name of the game. In an era of rising interest rates, investors have a lot more options and thus will increasingly demand a higher hurdle rate for their venture investments. Internally, this meant taking a cold hard look at the fundamentals of our business model, reining in more uncertain and good-to-have expenses and beaming a laser focus on unit economics and business efficiencies.
2. The labour market is a mixed picture
As a mirror of the bigger funding environment, the labour markets especially for tech talent are coming off a breathtaking multi-year crunch. We began 2022 catching up on exploding tech salaries, but are now ending it with a rise in inbound applications from tech workers hit by layoffs and hiring freezes.
We have also seen a flux of tech talent migrating from the Chinese tech ecosystem as funding activity in the tech ecosystem dried up on the back of a strict Covid Zero policy and a clampdown on the tech giants and the edtech sector.
Such a situation would have been a boon for us hiring managers just a few months back, but a tightening funding environment and a focus on near-term operating efficiency also means that we are a lot more judicious about the headcount we hire for.
3. Unprecedented test of entrepreneurs' executional discipline
I come from the generation of founders who grew up in an era of cheap capital and obsessions with hypergrowth. As a batch, we had not gone through the baptism by fire of recessions and financial strictures, such as the 2001 dot com bubble and the 2008 financial crisis.
As an engineer, I found the recent focus on business fundamentals and efficiencies highly refreshing. I had witnessed way too many growth tactics and business strategies that didn't make sense to me in the go-go era of the past few years.
This period also validated our fundraising strategy of raising at reasonable multiples with reasonable growth assumptions baked in. While in the past, I had sometimes felt that we lost out to our more aggressive and well-funded competitors, it turns out it is precisely in times like this when prudence translates into resilience.
I foresee the next few years to be a proving ground for our batch of founders to mature as seasoned operators, where we have to achieve growth with solid business fundamentals, without the aid of readily available capital - we have to grow businesses like generations of business owners before us. Perhaps then, we will finally understand with deep emotional resonance why "entrepreneurship" had never been a popular profession until the past decade.