The Tropic Market Watch With Adi Dehejia

Tropic Staff
July 27, 2022
11 min listen

Earlier this month we announced a new suite of software procurement tools that are helping our customers cut costs while optimizing their opex. This platform eliminates inefficient spending within a company’s tech stack, all through a single, integrated dashboard.

The platform itself was created in response to the growing software needs of companies across the country. To remain ahead of the market, we regularly speak with decision-makers on the front lines and industry analysts. It’s this intel that informs both our tools and the functionality they provide to our customers.

To help our audience understand what these conversations sound like, we’ve launched a monthly series entitled “Market Watch.” Our first guest is Adi Dehejia. As both a founder of a community helping develop leaders (Journey CxO), a business coach, and a fractional CFO, Adi is well-positioned to peer around corners and anticipate where the market is headed next.

In each installment, we’ll provide some of our guest’s latest market wisdom as well as share a ten-minute mini-podcast discussing the trends of the day.

And now for our Q&A with Adi.

Michael Calabrese: What kinds of business leaders do you regularly work with and what goals are you helping them achieve?

Adi Dehejia: I work closely with CEOs, COOs, and finance leaders at early-stage companies — bootstrapped, pre-seed, seed, Series A, and the occasional Series B. My goal is to help founders build great businesses – profitable, defensible, and growing.

I am fortunate enough to speak with investors (traditional venture and growth capital investors), so I hear their perspectives as well.

MC: How different are the needs of companies and by extension, their leadership teams today than in Q4 of 2021?

AD: The macro-environment has changed immensely from just nine months ago, driven primarily by higher inflation and resulting higher interest rates (to help manage down that inflation.) Publicly traded high-growth companies have been revalued downward. The Wisdom Tree Cloud Computing Index (WCLD) is down ~50% from its peak nine months ago. The Nasdaq 100 composite is down almost 25% over the same period.

Company leaders are reacting to these changes by re-orienting their strategy to prioritize free cash flow with the hopes of extending runway by several additional months. The common theme I keep running into is a “reduction in risk appetite.” The high-growth, high cash-burn strategies of 2021 are out of favor. Much greater emphasis is being placed on efficiency and related financial metrics. As a result, priorities are changing, impacting business strategies across the board.

MC: Beyond headcount reductions, what ways are companies extending their runways in the current environment?

AD: Leaders I’ve spoken with have begun renegotiating contracts with vendors to reflect their reduced seat license or usage needs. This reflects their having fewer employees today and also planning for reduced headcount growth into the future. Additionally, I’ve observed a renewed focus on working capital management. Companies are more focused on collecting faster from their customers and extending payable terms as appropriate.

MC: What advice would you give to small and medium-sized businesses facing economic headwinds?

AD: Growth is still imperative for start-ups to secure additional funding in the coming months and years. To fuel that growth, innovation remains critical, but CEOs and CFOs are demanding tighter guard rails. In most cases that means tying business experimentation to real-time reporting. Savvy leaders favor experiments with faster cycle times — so the decision to abandon or refine or double down can be made more quickly. I’ve also advised leaders to emphasize ‘must have’ qualities in new experiments or investments (e.g. highly likely to increase revenue or reduce costs) above the “nice to have” qualities (e.g. greater time efficiency). This is being applied to investments in new vendors, new marketing channels, and even new roles across their company.

We’ll be back next month with another installment of our Market Watch series. For the latest from Tropic, follow us on LinkedIn and Twitter.

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