My groceries are how much!?!
Like the rest of the world, exclusive of industry, the hot topic around here is inflation and market downturn. Canada's consumer price index rose 6.8% last month compared to 2021 and groceries jumped 9.7% — the largest increase since September 1981. Oh, and gas prices are up 36.3% year over year! And, just like every family, founders are feeling the crunch right now.
We’re in a near perfect economic storm for businesses. Input costs are up (it costs more to make what they make), interest rates are up (money costs more to borrow), and as governments begin to take action to slow inflation the markets have started to downturn, dampening demand for products and services (it’s getting harder to sell) and fundraising is becoming more difficult. But just like when a new Intergovernmental Panel on Climate Change (IPCC) report comes out, we need to act decisively and strategically … not panic.
As our founders, investors and regular readers of this newsletter know, we are very ‘active’ investors (pun always intended). This month our team gathered to triage the market’s impact on our portfolio companies and to tailor playbooks to support each. Writ large, we’re recommending ways each company can continue to grow, find capital efficiencies and to decrease risk where possible. More specifically (and we hope this is valuable to all reading this), top priorities for companies to focus on are:
Get visibility into your true financial picture
Be clear on strategic priorities
Cut and lock in costs where possible (and strategically)
Variable-ize your costs
Evaluate where prices may need to and/or can increase
Invest in automation with near-term payback, like financial systems
Plan ahead for future financing needs and adjust expectations
Importantly, we see companies that mitigate emissions and create environmental impact while delivering customer savings (aka the companies we invest in) as being insulated from many of the macro conditions. Attracting talent, obtaining non-dilutive financing, policy tailwinds and accessing capital all favour climate-saving companies in today’s competitive market. We’re not counting any proverbial chickens … but with support, prudence and unflinching commitment to positive impact we think there is still lots of room for climate positive companies to win.