I don’t think we are at the bottom of this yet. I do expect more startups to layoff, close down and due to cash reserves running out. You can listen to my discussion with VC Jeremy Au and Radio DJ Andrew Zhan here.
I have been following this closely since February. It matters to me as I am a tech worker who works in the SaaS sector. I also work with a lot of startups and venture capital firms in my day job. Tech winter impacts both myself and my customers.
In times of crisis, I always think about two things “How can I turn this into an opportunity?” and “How can I set myself up for long term success?”
This is my game plan.
1. Have 12-18 months of emergency funds
Many startups have been advised to keep at least 24 months of runway to stay afloat during this period of time.
The same applies to employees. We should be thinking about “If I lose my job tomorrow, how many months can I survive for?”
During these times, it is important to have emergency funds. Here is how to calculate your emergency funds:
Monthly expenses including income tax, mortgage, insurance etc X 12 -18 months
Emergency funds can be cash or short term fixed deposits (6 months). As long as the total sun adds up to 12-18 months within a year.
While some have chosen to only have a 6 month buffer, I have personally chosen to keep a buffer of 12-18 months.
Firstly, we tend to underestimate how much we might spend. Unpredictable life situations could happen after we get laid off. We want to make sure we have ‘dry powder’ ready for circumstances like these.
Also, it is not wise to rush to get a new job. When you are desperately looking, you are in a worse position to negotiate and may even take a job that does not pay you as well. That may impact your future earnings.
Having 12-18 months of emergency funds has given me a lot of psychological safety. If I were be so unfortunate to be laid off, I know that I have a huge buffer to cushion the impact.
2. 雪中送炭 : Focus on impact
I am someone who pays attention to key trends, try to anticipate them and constantly ask myself “How can I 借东风？(Borrow the easterly winds)”.
This mindset is influenced by my Taoist beliefs無為(wu wei). This means to ride the wave of change, move with it and not against it and make use of its tremendous power.
In February 2022, I chanced upon a deck by a growth stage founder. He shared that there has been > 50% compression in public SaaS multiples since Nov 2021. This will persist so long as inflation and interest rates remain high. He shared with his leadership team that it will be key to have a longer horizon for the use of funds.
I knew a storm was coming and gave a lot of thought about the implications on the industry and how I wanted to position myself.
There is this saying in mandarin 锦上添花易 , 雪中送炭难 which means it is easy to add flowers to a brocade but hard to deliver charcoal in the snow.
I wanted to not be a fair weathered friend who was only there during good times but rather to be the person who helps others in crisis.
So, I started thinking about how I could adjust myself to add value and contribute to others during this period of time.
One of the key risks I took was to leave my previous company after only 10 months and join a new one which will empower me bring more immediate value during the tech winter.
For the past few months, I’ve been able to deliver a huge impact to many of our customers via my job at Spot.io
Many startups are doing great work by solving key problems in our society and improving the lives of their customers.
If they fail during this winter, it is a huge loss not only to the founders but also to everyone else. By optimizing and automating their cloud infrastructure, we’ve been able to to free up budget to keep them afloat, and re-channel both budget and manpower to strategic priorities.
Through this experience, I hope to add as much value as possible; save some peoples’ jobs; collect good karma and build lasting relationships.
3. Deepen and build work relationships
Since February, I have been focused on building up existing industry relationships and building new ones. This was an advice from one of my previous boss and also a Bazi master 😂 and it has worked out pretty well.
I have also made it a point to talk to every recruiter who calls my mobile even though I am not looking for a new job now. I would try to point them in the right direction by matching them with a friend who is looking. The idea is to build two relationships – with the recruiter and also with the person I am helping.
Meeting new people and building relationships in the industry is still quite an intimidating process for me. This is especially so in an industry that is so male-dominated.
I still face self-doubt, feel shy at times and wonder if people might sometimes take advantage of my generosity and trusting nature.
However, I gradually learned there is a lot I cannot control so I can only focus on my attitude. These are the principles I will abide by:
🍀诚信赢天下: There is no direct translation for 诚信 and the idea is to treat others with sincerity, honesty, gratitude and in good faith. A relationship has value only if it is genuine. I try to be vulnerable first; show up authentically; give first and open my heart. I hope that others can be real and sincere to me in return.
🍀 Think win-win and long term: Try to add value to others also by sharing knowledge, budget, making introductions and resources. Sometimes, people may not be kind to us or able to help us at all because of various factors such as level of maturity or that they are going through a bad time in their own lives. Have empathy, extend your hand to help first and think long term.
🍀 Increase your surface area of luck: Each new person you meet expands your luck surface area. Several new connections I made were done through cold emails, and taking the first step to connect at parties and conferences. Like attracts like. If you have similar values as others, they will connect you with other like minded folks. That is how you build your tribe.
4. Upskill, upskill, upskill
I listened to a podcast during the Covid period and one of Zenyum‘s co-founder shared a quote which I still remember today. He said
“When Fishermen cannot go out to sea, they repair their nets”
The idea here is to really double down and focus on your own growth and learning.
Here is what I did in 2022
In my new role, I had to work with a lot of VCs and growth equity companies. I took a course on venture capital so I could learn how they think; how to speak their language and how to add value to these partners I work with.
I also doubled down on my core skill set by learning from one of Saleforce’s top performing individual contributors.
To prepare for my next step, I also started speaking with several SaaS leaders to learn about leadership principles; hiring; running a team; building a GTM strategy etc.
When I come across interesting books, concepts and ideas, I would share them on my Instagram, LinkedIn and newsletter.
I have yet to define a learning agenda in the first half of 2023. This will involve reflecting on my 2023 priorities and identifying potential gaps.
5. Invest consistently
Topics like fixed deposits, savings bonds are increasingly popular in the personal finance space. I see them covered extensively by many creators and publications.
However, if one neglects stocks and ETFs now, it could be a missed opportunity.
After all, recessions do not last forever. I’ve been through a bear market in 2018, March 2020 and again in 2022.
I keep advise from Warren Buffet and Charlies Munger close to my heart: “Be greedy when other people are fearful” and “The first rule of compounding: Never interrupt it unnecessarily.”
As tech stock values plunged throughout the year, private equity firms such as Thoma Bravo began hunting to acquire smaller ones. They saw companies with lots of upside being vastly undervalued in the brutal market conditions of 2022.
During this period, I did not reduce my position and instead continued to invest consistently in companies in my portfolio; S&P 500; funds and unit trusts.
I also started learning more about alternative investments and private markets this year. This is an area I wish to continue learning more about in 2023.
We cannot change a lot of things which happen. However, we can take steps to prepare ourselves for it.
What I feel is important is not just taking steps to prepare ourselves for crisis but also maintaining conviction in the path we’ve chosen for ourselves.
Despite the winter, I am still really bullish on the tech sector and Southeast Asia. I believe in the long term growth of this industry and this market and will continue to build my career on it.
This is not our first bear market or tech winter. Neither will it be our last. There could be worse ones in the future to come even after we recover from this.
I treat this entire episode as an opportunity to build resilience; adaptability and maximize what gains I can get from it.