Tech companies predict the (economic) future – TechCrunch

by Joseph K. Clark

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Earnings season is coming to a close, with public tech companies wrapping up their Q4 and 2020 disclosures. We don’t care too much about the more prominent players’ results here at TechCrunch, but smaller tech companies we knew when they were wee startups can provide startup-related data points worth digesting. So, each quarter, The Exchange spends time chatting with a host of CEOs and CFOs, trying to figure out what’s going on to relay the information to private companies.

Tech companies predict

Sometimes it’s useful, as our chat with recent fintech IPO Upstart proved after we noodle with the company about rising acceptance of AI in the conservative banking industry. This week we caught up with Yext CEO Howard Lerman and Smartsheet CEO Mark Mader. Yext builds data products for small businesses and is betting its future on search products. Smartsheet is a software company that works in collaboration, no-code, and future-of-work spaces.

They are pretty different companies, really. But what they shared this time ’round the earnings cycle were macro notes or details regarding their forward financial guidance and their anticipated economic conditions. As a macro-nerd, it piqued my interest.

The text cited several macroeconomic headwinds when it reported its Q4 results. And tying its future results somewhat to an uncertain macro picture, the company said that it is “basing [its] guidance on the business conditions [it sees for itself] and [its] customers currently, with the macroeconomy, which remains sluggish, and customers who remain cautious,” per a transcript.

Lerman told The Exchange that it was not clear when the world would open — something that matters for Yext’s location-focused products — so the company was guiding for the year as if nothing would change. Wall Street didn’t love it, but Yext won’t have high hurdles to jump over if the economy improves. This is one tack that a company can take when it talks guidance.

Smartsheet took a slightly different approach, saying in its earnings call that its “fiscal year ’22 guidance contemplates a gradual improvement in the macro environment in the second half of the year.” Mader said in an interview that his company wasn’t hiring economists but was simply listening to what others were saying.

He also said that the macroclimate matters more in saturated markets. He doesn’t think that Smartsheet is in; its results should be more impacted by things like “the secular shift to the cloud and digital transformation,” to quote its earnings call.

What the economy will do this year matters quite a lot for startups. An improving economy could boost interest rates, making money a bit more expensive and bonds more attractive. Valuations could see modest downward pressure in that case. And venture capital could slow fractionally. But with Yext forecasting as if it was facing a flat road and Smartsheet only expecting things to pick up the pace from Q3 on, likely, what we have now is mostly what we’ll get.

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