How founders and VCs should prepare for a recession

Recession – it’s a dirty word in the tech and startup ecosystem, but ignoring it won’t make it go away.

In that spirit, our new “Recession Watch” feature analyzes related news. And to complement that, Tech in Asia reached out to two founders and one venture capitalist to see how they’re preparing for what’s to come.

Angie Leong, co-founder and CEO of Angie’s Tempeh, a startup that specializes in plant-based protein made from fermented beans and grains

Angie Leong / Photo credit: Angie Leong

First of all, I’m trying to keep operations lean. This is probably the toughest thing to do, but it’s necessary to survive the recession.

My advisors have warned me that the recession may last for two years and that it is important to stay in survival mode. I had to put the company on a temporary hiring freeze.

We’re also ensuring that our products are affordable for the mass market by reducing prices for premium products.

The current elevated inflation in the costs of necessities like rent, food, and energy has had a big impact on consumers. On the whole, they are transacting less often, and when they do shop, they’re looking for a deal.

Finally, as a startup in the seed stage preparing for future expansion, we still have to raise money to grow. Funding is harder to come by these days, so we have to show investors that our business model can survive the recession.

Keith Tan, CEO and co-founder of Crown Digital IO, an IoT startup that created a robotic barista

Keith Tan / Photo credit: Keith Tan

It helps to understand how demand for your product works. The demand for coffee is generally inelastic as there are few close alternatives. Coffee’s one of the last things someone will give up as it costs a relatively small percentage of their income and is a vital part of their daily routine.

My company also sells coffee that tends to be cheaper than what many other cafes in Singapore offer. It’s priced at around S$4 (US$2.96) – labor costs have been reduced, thanks to our investment in robotics. This lower price point, combined with the inelastic demand, makes me not particularly worried about a recession. If anything, it’s an opportunity.