• August 29, 2022
• by:Serhat Pala

My wife and I came to the USA for our San Diego State University MBA degrees from Turkey after we finished Bogazici Economics and worked in Istanbul for a couple of years. Our goal was to go back after school and continue our professional careers in finance. However, we caught the entrepreneurship bug while still in school and taking part in the activities of Lavin Entrepreneurship Center (which was called EMC back then). It was an exciting and vibrant time for technology startups. 

The late 90s brought us nonsensical (too early, too fast) flops for its times like Boo.com, Geocities, Kozmo, Pets.com, Flooz.com, and the starts of the giants of today like Google, Amazon, eBay, and Booking Holdings.  

Before I knew it, I was starting my first Internet company that provided an internal website search tool provider for large community websites called vortals (one of those old terms of the past that are hardly heard of nowadays). 

We had a great start with that company, with a few clients piloting the technology. We were gaining traction among retail investors and gaining recognition in community website circles of the time. Then, as we turned the corner around Y2K and AOL concluded their giant merger with Time Warner in Jan 2000, we felt we were at a great place. We had investors calling us, and we were picky and selective about whom we brought on board. The plan was to hold off until we increased our MRR to the next level and then go for the next fundraising round. We had a low but growing burn rate, and many of the pilots by our clients will be turning into large-paying contracts. So 9-12 month runway felt like more than enough time. 

Then things changed so quickly and drastically. First, Microsoft stock (mainly due to an antitrust ruling) dropped, starting a significant down trajectory for Nasdaq, which was followed by back-to-back days of substantial drops in stock market indexes. Investor sentiment changed so quickly that it was hard for founders to grasp what might lie ahead. Venture Capital was no longer available, and the mindsets of everyone in the technology startup ecosystem drastically changed. 

What did that mean for us, as a technology solution provider startup in the changing landscape? 

• Investors were nowhere to be found, and we quickly realized we had to have a plan B for no funding coming in anytime soon. 
• Our clients’ investors were nowhere to be found, all our paying customers stopped paying, and none of the pilots we were expecting to go to paying contracts were going to happen.
• Our 9-12 runway, despite quick adjustments in spending, decreased to 4-5 months without existing clients paying.

What were the lessons learned for me as a founder from that experience?

• Things can change faster than you expect. Even as a small team, keeping up with changing market conditions will be challenging, so you must always be alert and ready to act. As a founder, you do not have the luxury of waiting a little longer to observe and execute change. 
• Your products and services are dispensable when your startup operates in the innovative and early adopter phase of a new market. So know and observe your beachhead very well. Do not depend on the continuation of existing revenue metrics. 
• Don’t wait to pivot. If you believe you need to pivot anything like your value proposition, business model, go to market strategy, then act quickly and move forward fast. Often pivots take longer than expected, and you need to give a buffer to your team for hitting milestones.
• Get good advice often, but make your own decisions. Having intelligent, experienced, and trustworthy advisors is always a critical success factor. However, in turbulent times, it is even more so. Therefore, make sure you have diverse sources of good advice. Smart money, early investors that have entrepreneurial experience, pays the most in these turbulent times. 
• Invest in your mental health with a combination of a personal support network (family, friends), short but frequent short “me times,” doing meditation as a part of your daily routine, and proactively trying to have a good sleep schedule. The last one is probably the hardest of all, given that you have more reasons that will keep you awake at night. However, some tips can at least improve your sleeping regimen and, in return, give you more ammunition to cope with stress. 

The current economic climate reminds me a lot of the Internet bubble burst times. Yet as founders and investors, we have the experience of the past that can help us guide better this time. Plus, startup and early-stage investment ecosystems are more robust and established. So, as a former (and always in the heart) founder, I chose to be an optimist. Afterall: 

“Nothing of any importance has ever been accomplished by a pessimist.” – Jack Welch.