Bucking the Bear: How Startups Can Thrive in a Downturn

As a startup founder, you're no stranger to taking risks. You've put your career, your reputation, and your personal finances on the line to chase your dream. But what happens when the economy takes a turn for the worse? How do you navigate a downturn market and still come out on top?

The answer is simple: you buck the bear.

A bear market can be a daunting prospect for any business, but it's especially challenging for startups. With limited resources and no track record of success, startups are at a disadvantage. But that doesn't mean you can't thrive in a downturn. In fact, a challenging market can be the perfect opportunity for startups to outsmart and outmanoeuvre their larger, more established competition.

Embrace the challenge

First and foremost, startups need to embrace the challenge of a bear market. Don't let yourself be intimidated by the downturn. Instead, use it as an opportunity to demonstrate your resilience and resourcefulness. A downturn market is a test of your mettle as a founder. It's a chance to prove that you have what it takes to succeed in any economic environment.

Airbnb recognised that the downturn market would affect the traditional vacation rental market and decided to diversify its business by expanding into new segments such as luxury rentals, boutique hotels, and experiences. This allowed the company to tap into new revenue streams and increase its customer base despite the challenging economic environment.

Get lean and mean

When times are tough, every dollar counts. Startups need to be especially careful about where they're spending their money. The first step is to identify areas where costs can be cut. This could be anything from office space to travel expenses. The key is to find ways to do more with less. For example, instead of renting an expensive office, consider working from home or sharing space with other startups. Instead of traveling for meetings, use video conferencing. By cutting costs, startups can free up resources to invest in growth.

In 2017, Dropbox announced that it would be cutting around 9% of its workforce in order to improve efficiency and reduce costs. This included layoffs and consolidation of certain teams. They also consolidated their offices in San Francisco and Dublin to reduce the cost of office space and improve the efficiency of its operations. These cost-cutting measures helped Dropbox to improve its bottom line and enabled the company to focus on growing its business and developing new products and services.

Focus on cash flow

A bear market can be a great time to focus on cash flow. Startups need to make sure they have enough cash on hand to cover expenses and invest in growth. This means keeping a close eye on revenue and expenses, and being proactive about managing cash flow. For example, startups should consider offering early payment discounts to customers or negotiating better payment terms with suppliers.

Team collaboration platform Slack controlled its spending by being selective about investments and cutting costs wherever possible. The company also implemented cost-cutting measures such as reducing its workforce and cutting down on its marketing expenses to improve its bottom line. This helped the company to conserve cash and maintain a healthy cash balance.

Seek out new opportunities

A bear market can also be a great time to seek out new opportunities. When the economy is down, it's often easier to find deals on everything from office space to equipment. Startups should also be on the lookout for new customers and partners. With many businesses struggling, there may be opportunities to win new business or form strategic partnerships. Startups should also be looking at new markets or products. A bear market can be a great time to expand into new areas or develop new products.

Whilst many companies struggled to shift gears during the pandemic, Zoom capitalised on the macroeconomic demand towards remote work and online learning. Zoom responded quickly to the increased demand for its services by adding new features such as breakout rooms and virtual backgrounds, as well as integrating with other tools such as Google Calendar, Outlook, and Slack. Zoom's stock value increased significantly during the pandemic as the company's revenue grew by over 300% in 2020.

Be aggressive

Startups need to be aggressive in a bear market. This means being willing to take risks and make bold moves. For example, if a startup sees an opportunity to acquire a struggling competitor, it should seize it. Or if a startup sees an opportunity to invest in a new product or market, it should do it. Being aggressive doesn't mean being reckless, but it does mean being willing to take calculated risks.

Southeast Asian ride-hailing startup Grab began as a taxi-hailing app in 2012, but quickly expanded to include private cars and motorbikes. During the bear market of 2018-19, Grab continued to dominate the ride-hailing market in Southeast Asia, even acquiring its main rival Uber's operations.

Final thoughts

A bear market can be a difficult time for any business, but it's especially challenging for startups. With limited resources and no track record of success, startups need to be extra smart and strategic to survive. However, by following these tips, startups can stay afloat and even grow during tough times. Get lean and mean, focus on the fundamentals, seek out new opportunities, stay flexible and build a strong team. With