CEO Summit: Cash is King! Recap

The 2nd annual ONE WORLD CEO Summit – Cash is King! – brought together impact CEOs, investors, and ecosystem builders for a virtual day of learning, sharing, and networking. The Summit acknowledged the challenging times we are in, and offered guidance, peer support, and perspective to navigate the current environment.

The first half of the Summit featured a Grounding exercise, Market Overview, and conversations with Venture Capital and Angel investors. The recording can be accessed here and above while key highlights can be found below.

[4:12- 12:43] Welcome & Grounding

Bailey Farren, CEO of Perimeter, helped our participants get grounded with a visualization exercise, based on her experience working with first responders to mitigate the effects of PTSD.

[13:25-30:35] Market Overview

Jen Barnette, Associate, Cooley, provided a general overview of the funding environment, based on Cooley’s recently published quarterly finance report

While the current state of the market, inflation, and economic volatility has been filled with doom and gloom, Cooley’s report (with data from Q1/2022) provides a more positive outlook. This outlook was balanced with a more nuanced overview of the investor landscape:

• Deal counts have stayed high, with Seed deals at a record high

  • Deals are taking longer

• Record valuations for the first 6 months of 2022

  • There is a general slowdown and while valuations haven’t gone down, there is a conversation around data points and multiples

• VCs are continuing to raise money and invest in new deals

• Terms of Notes/SAFES are becoming more investor friendly

• Decline in Series E & later

• The “definition” of Pre-Seed and Seed Rounds are changing:

  • Seed Rounds are getting bigger

  • Average pre-money valuation currently $17M

  • Pre-seed are Notes/SAFES without caps with $3-5M valuations

[30:36-1:01:40] Funding Milestones & Portfolio Guidance:  VC Perspectives  

Shripriya Mahesh with Spero Ventures and Alan Kelley of SJF Ventures provided additional color into the Venture Capital space

Our speakers reviewed the current market situation, made recommendations for portfolio companies; and suggested strategies to preserve cash:

The current market situation:

• Every downturn is unique, and this one is particularly unique because there is so much money in the market, which is a differentiating factor from the 1999 and 2008 downturns

• Multiples have felt very inflated

• The full correction more than likely hasn’t occurred

  • VCs are exercising patience and discipline, with some flexibility around valuations and stage

  • VC money is there, but competition amongst entrepreneurs is fierce; funding remains challenging

Portfolio Recommendations:

• For companies who have money, try to extend to 2024 before next raise – particularly those who raise with high valuations given the anticipation of a valuation reset

• VC recommendations re: extending cash runway depends on whether the investment came from an older fund with limited cash reserves left to support the company vs. a newer fund with sufficient reserves

Ways to preserve cash:

• Prioritize getting to profitability if that’s an option

  • If spending money to acquire customers, cut marketing; cut headcount to preserve burn

• Set an objective and let the solutions percolate

Milestones:

• Milestones depend on the company and the investor, but haven’t changed dramatically in the current environment

• Every company can’t be pushed to profitability. Those that are on their way to profitability closer to Series B

Final guidance for companies looking to raise Seed round:

• Have a plan in case the raise isn’t successful

• Look at this time as ideal to build your company. Stay small, be resourceful, and push things forward and position yourself to take advantage of the market when it improves

[1:01:41-1:31:24] The Investment Picture:  Angel Perspectives

Ullas Naik of Streamlined Ventures and Miles Lasater of Purpose Built Ventures provided their assessment of the early stage investment markets; recommendations and criteria for founders seeking funding; and ways to preserve cash

Perspectives on the current early stage investing market:

• Caution. Things aren’t bouncing back quickly.

• Prepare for a long fundraising cycle and for a lot of doors to be closed

• Valuations have come down slightly, but not as much as anticipated

• Macro situation – low to negative real interest rates has pushed a lot of money into venture and has helped fuel growth. As this changes, LPs will allocate less and the terms will more than likely change 

Recommendations for early stage entrepreneurs who are looking to start raising or are in the midst of the round:

• Seed predominantly being done with SAFEs with no special terms, but with lower valuations and longer processes

• Be cautious with business plan and assume that capital is not as plentiful as it has been

• Less of a premium put on growth

  • Entrepreneurs who are frugal, resourceful, and measured with growth will be rewarded

• Have a broad funnel of investors to target

  • Volume metric:  You haven’t spoken to enough potential investors if you haven’t received at least 100 no’s.

 Angel Investors and Criteria:

• Institutionalized angel groups have become more risk averse. Individual angel investors are still writing checks

  • Check size hasn’t changed on the angel side

• Have 18-24 months of runway

• Be prepared to be constantly raising money; it could take 3-4 years

• Ask for more than you think you can get

 Ways that entrepreneurs can preserve cash and/or increase cash flow?

• Ask vendors to defer payment until certain milestones are met

  • New deals shouldn’t be used to pay off back debt. Management should look at increasing equity vs. deferred comp.

• Build relationships with pre-seed funds which makes downstream fundraising easier

• Utilize revenue-based financing if that’s an option

Final words of wisdom:

• Focus on customers and employees

• Present a sophisticated business and communicate well as investors have more time to scrutinize

ENTREPRENEUR EXPERIENCES

The second half of the Summit focused on peer-to-peer support and engaged 4 seasoned entrepreneurs in sharing their experiences in a number of key topics:  Fundraising; Cash Management; Maintaining Resilience; and Acquisition.

To protect the confidentiality of the conversations we are only sharing key insights, and not the supporting video. 

Managing the Ups & Downs of Funding - Holding onto the Why Virginia Klausmeier, President & CEO, Sylvatex

Sylvatex, founded in 2012 is a climate tech company focusing on making EV materials less expensive and more sustainable.

Tips:

• Funding is never linear

• Take advantage of non-dilutive funding resources, including NSF which supports a range of ideas beyond technical science

• Focus on product-market fit and be clear on the why

• Be clear with mission – if you are trying to “change the world,” with your business, make sure funding and other key partners hold those same values

Strategies to Manage Cash Flow – Eric Quick, Co-Founder & CEO, PocketCFO

PocketCFO is a SaaS-based financial intelligence and wellness platform focused on small business that was born out of continuous cash flow struggles from previous ventures.

Tips:

• Always maintain open communication with those around you to keep you grounded.

• Question everything that has to do with cash spend

• Pivot:  act with authority and the knowledge that you’re going to be wrong. Avoid analysis paralysis, and iterate along the way. 

• Debt raises come with obligations, which can be challenging to navigate if you don’t have clear predictions of cash flow and revenue.

Rising Above Trials & Tribulations Laura D’Asaro, Co-Founder/CEO Chirps Chips

Founded in 2013, Chirps makes food with insects as a more sustainable protein source.  

Tips:

• Understand your unit economics  

• Do really well in 1 place before scaling. Take it slow.

• Make sure your product is good enough. 

• Be clear about what you are measuring

An Acquisition Story -

Andrew Hill, Director, LiftEd by Central Reach

An Edtech company focused on special education that provides software to educators and school-based commissions for instructional planning, progress monitoring, and behavior management. Acquired in June 2022 by Central Reach.

Tips:

• Make sure you know your ideal customer profile and stay true to that

• Be transparent, communicate and be decisive. Lean on investors for support

• If looking to be acquired, you can have success by finding synergies with product, market, and skill set

CEO Network Preview – Intersessions with Executive Leadership Coach Amanda Breckenridge

Amanda previewed a series of self-care sessions grounded in neuroscience for continued excellence that will be offered this Fall for our CEO Network members 

Overview:

• How we respond to stress determines our ability to succeed as a leader

  • We all have a “window of tolerance” on the stress scale. When CEOs operate within that window, the capacity for decision-making isn’t compromised

• Stress can be found in both the amygdala and pre-frontal cortex

The multi-series offering will dive into:

• Better understanding of individual windows of tolerance

• Leveraging new research behind 6 human core needs to better understand individual’s hierarchy

• Defining a few actions that help build our windows of tolerance

The Summit wrapped up with a final round of thanks to all speakers and participants for choosing to spend their time with ONE WORLD.

Resources:

• CooleyGo- a free, online resource for start-ups

• Real People’s Fund - provides non-extractive debt and revenue-based preferred equity financing to Bay Area companies. 

• National Science Foundation - a federal agency that funds research and education in most fields of science & engineering

• PocketCFO Blog Post - Why Cash Flow is So Important for Small Businesses