The recent recession in the technology startup world is the first of its kind in nearly two decades, and has left entrepreneurs scrambling for solutions to save their businesses and ride out the storm. Mariko Tokioka is one woman who has some ideas on how to preserve operations during this uncertain time.
Mariko Tokioka could be described as a unicorn in the startup world. Forbes Japan named her to their Most Influential Women in Business list, and also featured her in their 55 Women in Global Leadership.
Her first startup, Quipper, was sold for $40 million and turned her second startup, EME Hive, into the world’s largest Asian American dating site. She has raised over $12 million for EME Hive.
Tokioka says as the economy slows, startups will need to change the way they do business if they want to survive any economic downtown. Grit Daily caught up with Tokioka and asked for her advice on what startups should do now to prepare their business for a recession, and if they’re running short on cash, how they can get the financials in order to stay in business.
Grit Daily: What advice do you have for startups struggling during this downturn?
Mariko Tokioka: “I read a study in the Harvard Business Review that found companies that recognize recession risks early (measured by early mentions in earnings calls) have a 6 percent higher shareholder return rate. This is why it’s so critical to act fast as a startup during any economic downturn.
Another point raised in the Harvard Business Review study is that a group of companies that performed well during the economic downturns focused on long-term value – their annual growth rate was 4 percent higher. This is another reason why startups need to focus on long-term growth. Options you can take include, strengthening customer service with the goal of decreasing customer churn. Or, enhancing up-sell and cross-sell programs for existing clients to add a long-term value while strengthening cash position. You can also integrate with other vendors and create an integrated product or expand the re-sell partnership program to encourage new revenue streams.
Grit Daily: What advice do you give for startups running out money?
Mariko Tokioka: “If you’re running out of money, you typically have three options: raise more money from investors, sell more products, and cut costs. If you are in the pre-seed or seed stage, VCs mainly look at the team and potential rather than financials, so you have a better chance. If you are in later stages, they are now pulling term sheets at unprecedented rates, so you should be ready to take a low valuation.
Another route when you’re running low on cash is to ramp up revenue. According to the Harvard Business Review study, the top performers of economic downtime in 2008 actively released or adjusted product to meet the new market needs. A third option is to cut costs and expenses. This approach can give a startup the runway to outlast a recession, and buy a company more time until the problem is solved. Important areas where costs can be cut are rent, headcount (though do not lay off lightly), among other non-necessities.
Grit Daily: How are you preparing for the downturn at your company, EME Hive?
Mariko Tokioka: Most startups are always in fundraising mode and thankfully in our situation, we have raised plenty of cash from investors to withstand any economic downturn. We have plenty of runway, and continue to develop and improve our live streaming platform. Our live streaming revenue has grown over 4xsince 2021. For now, our plan is to stay the course and keep doing what we’re doing.
Grit Daily: What do you see on the other end of any recession for startups?
Mariko Tokioka: An economic downturn can be good opportunities for growth for startups. Labor gets easier to find and it’s more affordable, especially in the tech space. If you have a unique product or service, and your company is run well, you will be in a great position to beat any competitors. Ultimately, recessions help eliminate the weak ideas and fortify the strong ones, so stay strong and focused on making your startup dream a reality.
About Mariko Tokioka
Mariko Tokioka is the CEO and founder of EME Hive, the largest Asian American dating and live-streaming app for finding community, friendship, and love. Prior to founding EME Hive, Mariko was the founder and COO of Quipper, an e-learning mobile app company that was acquired by Recruit Holdings for $40M in 2015.
Mariko was recognized as one of Forbes Japan’s 55 Women in Global Leadership in 2016, and named Forbes Japan’s Most Influential Woman in Business in 2019. She holds degrees in Computer Science from Knox College and the University of Aberdeen, as well as an MBA from Oxford University.