Bear Market Blitzscaling
High-Growth Strategies for High-Risk Times
People often ask if it’s possible (or even sane) to start a company during down markets. Moreover, they question whether existing startups will be able to deploy any of the sort of high-growth tactics critical to becoming an enduring business.
My short answer is always “Yes.”
In fact, times of economic downturns can be a great time to start and grow businesses, but only for those with the differentiating leverage points that push them far ahead of the competition. Understanding how to use those levers comes down to smart decision-making in the context of numerous factors, from the macro technological trends that inspired the product you are building to the support of your personal and professional network. All of this dictates your ability to secure capital, operate efficiently, and ultimately achieve revenue in economically compromised environments.
Just like doing business in any economic environment, being bold enough to run a company during bear markets is not just about having irrational belief in the success of what you’re doing, but about approaching it in a risk-intelligent and strategy-intelligent way.
I sat down with my Blitzscaling co-author Chris Yeh on the Greymatter podcast to discuss the mindset and tactical frameworks startups can apply to decision-making during economically challenging times. Based on examples from my own experience at PayPal and LinkedIn as well as those of other successful companies started during downturns, I outline strategies and considerations startups should have in order to start, grow, and thrive during bear markets.
You can listen to our conversation at the link below or wherever you get your podcasts.
EPISODE TRANSCRIPT
Chris Yeh:
Hello, I’m Chris Yeh, the co-author of Blitzscaling, and I’m here once again with my co-author and old friend, Reid Hoffman, the co-founder of LinkedIn and investor at Greylock Partners.
Now Reid, let’s start with the broader context. A lot has changed since we released Blitzscaling in 2018, both in the startup world and the world at large. What are some of the changes that you think affect the way entrepreneurs should Blitzscale today?
Reid Hoffman:
Well, Chris, let’s start with a quick rehash of what’s important about Blitzscaling. First, the definition: prioritizing speed over efficiency in an environment of uncertainty. Naturally, part of that is [the question of] how do you spend capital – whether it’s financial capital, human capital, or other capital – in order to prioritize speed.
Then, when capital becomes much more precious, (when the capital markets aren’t flowing as much) then the degree to which you will spend capital inefficiently is much lower. It’s a natural outcome. Then people would naturally say, “Well, that means that of course during times like now where you have a strongly troubled market, Blitzscaling goes away.” That would be a natural inference.
The reason why that’s incorrect is because Blitzscaling is always relative because of speed; it’s relative motion. It’s still the question about business, and that business is fundamentally about competition. How do you essentially compete for products and services, compete for markets, compete for customer affection, compete for employees, compete for capital, all of this. Speed is always a critical function in competition.
The times where speed isn’t a highly relevant variable in competition are very obscure and are more minor things. Then you say, “Well, okay, what are some changes you might think affect the way entrepreneurs should Blitzscale?”
Well, the certain thing is you’re going to be very careful about your capital – and you’re going to be very careful about where you might be choosing to spend that capital in order to outpace your competition – but it’s still the case that you will be outpacing your competition. You will be seeking to outpace your competition.
Now you may outpace them in longevity, in surviving in order to thrive, so you might be doing things that way. Whereas most of the competition, for example, might be telling stories of endurance, you might still be telling a story of market growth because, by the way, investors still know that that’s what they want. Presume that you can get there, presume that new capital is hard to come by, but you’re still trying to get there. Those are the knobs by which you would be looking as an entrepreneur during a bear market about how you would think about Blitzscaling. Whereas, of course in a bull market, every possible idea that you could have to possibly use capital to accelerate, you might just experiment with and deploy. Here, you might be much more careful. Obviously the knobs are tuned much more narrowly, in a much more contained fashion, but those are the frameworks by which entrepreneurs should be thinking about Blitzscaling.