Capital efficiency means doing more with less. By historical standards, it’s still much easier today than it was for previous generations.

What traits do investors appreciate about founding teams? My favorite ones are strong execution and capital efficiency.

At Yonder, the B2B SaaS company I co-founded, we were always diligent with our capital, even during good times. For over 4 years, we bootstrapped. We didn’t fully use COVID-19 loans. When fundraising and valuation went crazy in 2021, we didn’t raise excess capital but used our cash wisely.

Why did we behave like this? Just like energy efficiency, capital efficiency is an attitude. It’s not something you can reach suddenly in one step, but something you develop over time.

Episode 1: COVID-19

When COVID-19 hit, I remember the Sequoia pitch deck “R.I.P. Good Times” from 2008 being recirculated amongst entrepreneurs. A product of the financial crisis, it warned entrepreneurs about lower valuations, smaller financing rounds, and longer cycles to raise capital. It also urged entrepreneurs to cut costs immediately to survive the downturn.

We also cut costs when COVID-19 hit. But our concessions were smaller than in other companies, as we were already capital efficient then and never spent lavishly on non-essential items.

No fancy office furniture.

No admin staff on the payroll.

No company cars.

No hidden founder perks.

No branded cups, notebooks, and hoodies for our employees.

Episode 2: Keep Improving

Even though we have always been capital-efficient, we haven’t reached the optimum yet. You can always improve your cost basis, irrespective of the economic conditions.

Each time somebody leaves the company, we diligently consider not replacing the person one-to-one, but becoming more efficient and through that more capital-efficient.

Every month, we check if we really need all those software tools that we are paying for.

Since COVID-19, work behavior has shifted from mostly on-site to hybrid remote and on-site. Furthermore, our team has internationalized and only parts of the team are based in our headquarters in Zurich nowadays. At the same time, office space prices per square meter have fallen by 50% in Zurich as a consequence of COVID-19. So being capital efficient means we will be moving into a smaller, cheaper office.

Episode 3: The World in Turmoil

Retrospectively, COVID-19 looks like a walk in the park compared to today’s turmoil: Multiple conventional wars all over the world. Trade war fuelled by the Trump administration. And many other challenges.

The world is changing so rapidly that you cannot foresee the events with ample warning time any longer. Raising money has become difficult again, so capital efficiency is becoming even more important now.

Episode 4: A Look in the Rear Mirror

Before we start whining about how evil the world has become, let’s be clear: In the three decades between 1990 and 2019, we have enjoyed an endless party of unrestrained upturn. And now we see the return to normalization in historical terms — life will become harder, and we will need to do more with less.

Switzerland, my home country, was spared in World War I and World War II. Nevertheless, times were tough at that time. Looking at the example of Swissair, the national airline at that time, exemplifies the existential struggle many Swiss companies faced between 1939 and 1945: Robbed by their core business, encircled by countries at war, and more than half their personnel on active military duty.

So maybe we’re not that bad off in our current times.