Over the past decade, the ever-evolving tech industry has witnessed huge growth across all international markets. The pandemic also uncovered numerous opportunities for tech giants and startups alike as the world moved towards the adoption of e-commerce solutions and digital automation of various services.
Yet, the recent wave of market downturn and economic uncertainty is likely going to hit the tech market with a recession. Tech giants such as Twitter, Meta, Microsoft, Amazon, and Uber have slowed down their hiring processes. Prominent tech companies and Silicon Valley startups are laying off workers and cutting significant investments. The rising inflation, declining stock market, the war in Ukraine, and growing interest rates have all contributed to this economic crisis that’s knocking the tech industry with full force.
Both companies and startups need to prepare well in order to face the ongoing crisis and upcoming recession. To achieve this, founders should emphasize outlining strategic approaches to extend their runways and cut costs.
- VCs, PEs and investment funds: The current equation
- Preparing the strategic response: VCs and incubators weigh in
- Cutting costs and extending runways: How-to’s
- The financial dilemma: How can companies keep building their product and brand?
- How can Nexton help you reduce costs and keep building your product?
VCs, PEs and investment funds: The current equation
In recent years, investors were pouring a lot of money into small and big tech ventures. This maneuver benefitted both startups and team members as this led to a booming expansion in the tech market and an upsurge in hiring rates. However, with the dipping stocks and market downturn, the impact is inevitable not only for major tech companies but also for the startup ecosystem.
Preparing the strategic response: VCs and incubators weigh in
Under these tough circumstances, startup investors and venture capital firms are advising companies to prepare for the “nuclear winter” ahead. The primary advice of all major investors to startups is to cut back on marketing costs, slow down the hiring rate and extend their runways indefinitely.
YCombinator, one of the most prominent startup incubators, has recently warned its portfolio companies to “plan for the worst” as funding continues to decline due to the economic downturn. The incubator giant issuing a warning to its portfolio companies undoubtedly depicts the worsening situation for startups.
Other prominent Silicon Valley startup accelerators such as Lightspeed and Sequoia also issued warnings to startup leaders to prepare themselves for an economic shift in the tech industry.
Cutting costs and extending runways: How-to’s
Tech companies and startup valuations continue to plummet as the signs of a potential recession become evident. Therefore, founders in the tech industry should have a clear plan to ride this wave of uncertainty. Our experts have put together a few key ways you can cut costs and extend your business runway:
Analysis of yearly budget:
A restricted cash flow provides you the right chance to review your finances and revise your budget. A deep analysis and review of your annual budget can help you identify your major expenses and costs. Once you’ve figured out the critical aspects for your revenue generation in the longer run, it becomes a lot easier to reduce operating costs by cutting off any unnecessary expenses and assets. Organizations should set a baseline target while attempting to minimize operating costs.
Reforecasting for success:
In tough times, forecasting at an organizational level can assist in amending the course of action, as required. An efficient and strategic financial forecasting enables the company leadership to seek opportunities for growth, identify constraints and challenges, and establish a clear roadmap for the organization’s future. Multiple crucial factors should be analyzed carefully while implementing forecasting. Cash runway, net revenue retention, and net burn top the list of those factors.
Remote teams and remote work:
As remote work becomes the new normal, numerous tech companies (particularly those in the startup ecosystem) have successfully transitioned to a work-from-home routine that helps minimize costs and also maintains a positive work environment.
Having a remote workforce is definitely beneficial, not just in terms of financial costs and expenditure but also in terms of team members’ productivity: By hiring remote workers, you can easily cut off overhead costs that are associated with a physical office such as rent, security, utilities, and more. Plus, remote work plays a major role in boosting employee productivity as this work model eliminates the need for unnecessarily long commutes and promotes a balanced work-life environment.
Moreover, remote hiring also enables companies to recruit top talent from across the world –without being restricted to the talent pool available in the local market. Hiring from various regions ensures companies that there will be a wide range of perspectives and viewpoints in their teams, which is also beneficial for business.
Cost-effective hiring: Recruit in LATAM
With the ongoing economic downfall, more and more companies are looking to expand their hiring efforts beyond U.S. borders, since remote hiring is a cost-effective strategy to tackle this crisis and minimize expenses.
One specific region that has the spotlight for remote hiring and is booming with remote talent these days is Latin America. For the past few years, LATAM has been the hub of economic growth and an attractive investment marketplace for companies, especially those in the tech industry. With a wide talent pool and an abundance of skilled tech workers, Latin America provides companies with a bright opportunity to hire a remote workforce and grow their business.
While English is a second language for Latin American professionals, they have powerful language skills compared to other areas of the world. In fact, a highly qualified education system has led to an increased level of English fluency among the people in the region. Plus, given Latin America’s proximity to the U.S., LATAM tech professionals have the cultural know-how to work well in multicultural teams.
The region’s time zones allow for up to 8 hours of overlap with the U.S., ensuring smooth and synchronous collaboration between companies and their team members. Ultimately, remote hiring in Latin America guarantees a cost-effective approach to attaining top-tier remote team members.
The financial dilemma - How can companies keep building their product and brand?
Worsening economic situations and recessions tend to compel organizations to lay off workers. As a tactical leader, you can choose to stand out among the others and boost the hiring process. This can prove to be beneficial for your company as the market is already saturated with talented individuals that have been laid off. It’s the perfect time for you to add value to your organization.
Besides, following a consistent hiring process during economic downturns creates a sense of security and confidence among team members –and it also speaks a lot about your company’s focus on workers, promoting a healthy work-life environment and uplifting team morale.
How can Nexton help you reduce costs and keep building your product?
Remote hiring in LATAM is a great strategy to attain cost-effectiveness while you keep developing your product and meeting company goals.
Salaries in LATAM present the opportunity for companies to hire in the region at around 40% to 60% less total cost compared to equivalent roles in the U.S. Moreover, talent based in Latin America has top skills to communicate and collaborate in a seamless way, and friendly time zones also mean that collaboration can be easy, smooth, and feasible for you.
With a specialized talent network spread throughout Latin America and an optimized recruiting process designed by engineers, Nexton can help you find the right talent that will help you in reducing your costs and developing your product –even in times of recession.