Kevin's name pops up on my iPhone again, he has tried calling a few times this week and, given his track record of trying to convince us to put up more capital for a very cool startup going nowhere, I hesitate, but end up picking up the call.
Our common portfolio company runs out of cash on Monday, he says, we need to declare insolvency or else the CEO might end up in a less sophisticated jail in the emerging market the company is headquartered in.
He is a bit nervous obviously since they pulled us into the deal, his and our capital on the line, and the whole rush of it. I am not totally surprised, but it is Thursday afternoon and two days ago Kevin had informed us that a sale to a major group was very likely and investors, including them, where willing to put more capital to keep the company growing while the deal was finalized.
It's a bit annoying to say the least, particularly since we had been advocating for a cost-cutting plan that allowed the company to be cash flow positive for the last few months. The reply had always been that this would destroy shareholder value. Well, there you go, I thought, shareholder value is now zero. Glad this was a very small investment for us, companies failing is part of life for a VC, I remembered myself.*
It's been a fantastic roll over the last few years, digital transformation and apps for all you can think of appearing on your screen, Software Eating the World or new cancer treatments in the advent of the decoding of the human genome. The last years have seen both tech giants and up-and-coming disrupters on the front pages of magazines and respectable old-school printed newspapers.
Profitability is the new black
Up until recently, and in crescendo, usage metrics growth was all that was needed to raise capital with VCs. Startups were in a mad dash to capture market share, had fairly easy access to capital and valuations were "rich", to say the least.
Growing into your valuation became the new norm, with investors rushing to do deals with fairly limited time for due diligence given the Fear of Missing Out herd mentality.
And then, with a few wobbles of the market, a prospect of interest rate increases, a few sneezes and colds from emerging markets and established ones, and suddenly profitability is the new black.
A recent monthly newsletter by tech advisors, Go4Venture, illustrates how times have changed driven by VCs attitudes towards startups.
In 2016, investors are again looking for profitable growth, capital efficiency, average priced valuations and taking their time to do proper due diligence, because this round of capital might be the last one for a very long time. Quite a change in a very short period.
When finally the mainstream industries were starting to pay attention to these pesky little companies disrupting their global dominance, setting up their corporate accelerators to join the cool gang at the must be new-age events dominated by the new tech sages, the markets turned and the party has appeared to wind down.
In fact, the real party might just be starting. The transformation potential unleashed by all the new technology from digitalization to artificial intelligence and the Internet of Things will have its full effect in the planet when global corporate titans start transforming their production, logistics and distribution networks by integrating the technology they and others have created over the last 5 to 10 years.
Rock Stars, interns and Jedis
Given the tough times ahead for raising capital and, in particular, the dawn of the 4th industrial revolution with its potential to transform all traditional industries, companies need to adapt. Certainly the rock star founder and VC cult of the last few years is not the most sober leadership strategy to get the hard work done in a sustainable way.
As a recent Hollywood blockbuster The Intern portrays very amusingly, experience, humility and perspective actually have a huge role to play when major transformations and challenges are underway.
More than ever, the leadership styles for this new reality will require big doses of all of the above, in particular because major societal, cultural, employment and skills transformations will be happening all over the world during the decades to come.
And yet, most people on this planet have not realized that their lives will change dramatically soon. They need to adapt at the risk of failing to benefit from these new opportunities.
This is true both for developed and emerging markets, young and old, but particularly relevant for those that aim to lead positively and to contribute to a more sustainable and fair world around them.
As the Star Wars saga depicts brilliantly, when the task at hand is full of insurmountable challenges and fierce enemies, only those willing to reach for their inner strength, superior ability and goodwill can lead others towards a new paradigm.
Given what we are facing in the 4th industrial revolution we certainly need Jedis back to lead authentically, amidst the tremendous challenges society will increasingly face.
Leading is no longer about raising easy money, it is more than ever about authentic leadership, hard work and contribution to a better world. All else will then follow.
*Details of the described situation were changed for confidentiality reasons