While it may be easy to get caught up in narratives of doom and gloom, today’s marketplace is actually ripe for the next generation of tech talent and ideas. More than 100,000 highly skilled technology workers have had to find new work in 2023, representing a massive pool of knowledge, innovation and ambition. A sizable portion of these individuals are ready to put new business models and out-of-the-box thinking to the test—as they look for new opportunities to thrive and solve future challenges.
Meanwhile, private investors are eagerly looking for new opportunities to partner and build tomorrow’s enterprises. After weathering tight economic conditions and an unfavorable backdrop in 2022, shifting market forces and changing horizons are opening a window and allowing early-stage investors to put their capital to work.
But before embarking on their entrepreneurial endeavors, new and aspiring business owners can learn from the founders and executives who have come out ahead during previous downturns. The protagonists from yesterday’s success stories know that tomorrow’s leaders will need thoughtful planning—provided in a timely fashion—and the right support network if they’re to grow and fulfill the objectives they’re setting out to achieve.
We’ve worked with tech entrepreneurs for decades, welcoming new ideas and businesses across generations. To help accomplish their goals, the tech leaders of tomorrow need the right financial advice and guidance. Here are some of those lessons:
Before You Start Building, Get Your Own House In Order
Founding and building a company from scratch is stressful, so it’s imperative that you minimize the distractions around you. By accounting for your personal needs, including funding and maintaining a “rainy day” fund, you are providing yourself with a personal safety net. This financial cushion not only reduces the stress of personal finances, it helps you prepare for the budgeting and financial decisions you’ll need to execute as a business owner. We recommend having an emergency fund that covers at least 3 months of expenses, although entrepreneurs sometimes find they need personal financial liquidity that can cover their needs for up to a year.
Even businesses need “rainy day” funds. The appropriate rainy day fund helps founders cover cash shortfalls, without putting their dream on life support. On the other hand, having too much cash on hand can stunt growth and hamper agility. Our advisors can help you achieve your ideal balance.
There’s more than one advantage to the financial discipline an advisor can provide. Today’s startup investors are reluctant to support founders who push for “growth at all costs.” By prioritizing sustainable economics in your personal financial situation, you’ll be familiar with how to best achieve cost savings, while still fueling a trajectory of growth. Working with an advisor as early in your entrepreneurial cycle as possible will help you achieve personal and professional success.
Plan For Success (And An Appropriate Exit)
It’s not arrogant; it’s prudent. When establishing the framework for your next business, take time to consider your ideal exit.
There are a number of biases and misconceptions that cause founders and early-stage employees to stumble when it comes time to exit their investments of time, capital and effort.
“Creating and executing an exit plan is not a solitary endeavor and requires close collaboration with key stakeholders—senior leadership, board members [and] major investors,” according to Touraj Parang, an entrepreneur, investor and advisor, in a report published by the Harvard Business Review. “Entrepreneurs need to devise and implement an exit strategy long before they are seriously considering a sale of their business.”
Presidio Partners has worked with countless business owners and helped them plan their succession plans—including building family legacies, creating value through public offerings or liquidating ownership through an acquisition, merger or another method.
Furthermore, it’s important to consider how business structure impacts founders’ exit strategies. Keep in mind that for every IPO, there are more than 30 acquisitions.
We suggest incorporating as a C-corp in the U.S., sooner rather than later, if your business provides something other than personal services. This foresightful move can facilitate an early start to issuing shares of qualified small business stock, which can help keep your business healthy and growing.
Remember, long-term planning and exit strategies start with “how.” In other words, when building your business towards an exit, answer the question of “How will I exit?” before identifying the steps needed to maximize all that you’ve achieved in building a business.
Partner With Specialists
Surrounding yourself with specialists who have guided or undergone their own exit will help you better navigate your journey as a business owner. A private wealth advisor; an accountant versed in mergers and acquisitions, public stock offerings and qualified small business stock strategies; and a qualified tax professional are all crucial supporters for maximizing your entrepreneurial vision.
Not only will these individuals help guide your business, but they’ll act as network amplifiers, connecting you with fellow business owners and executives. These individuals serve as powerful advocates for you and your business, providing access to potential funders, fixers and buyers. As you continue building your business, the right advisor can connect you with what we call “value-add investors,” individuals who open doors and provide operational support.
Get Ready for the Next Tech Boom
Whether you’re ready or not, tomorrow’s tech moonshot is already inching towards the launch pad, with fuel and pilots on standby.
To make the most of these attractive, but risky, opportunities, harness the value and experience of advisors who have experience guiding their clients through precarious scenarios and high-stakes situations. Even in the darkest days of recent financial turmoil and crisis, opportunities have emerged and new businesses have succeeded. By building and maintaining the right financial plan, avoiding common pitfalls and positioning their business for a future exit, the next tech boom’s founders and early-stage executives can enjoy success and achievement throughout the lifecycle of their company.
– Mally Burton, Director, Financial Advisor – Presidio Partners Private Wealth Management at UBS Financial Services Inc.
– Chuck Korasick, CFP® Managing Director – Private Wealth Advisor – Presidio Partners Private Wealth Management at UBS Financial Services Inc.
– Warren Coughlin, CFP® Senior Vice President – Private Wealth Advisor – Presidio Partners Private Wealth Management at UBS Financial Services Inc.
