Post House Capital CEO Jackie Reses sat down with Yahoo Finance's Brian Sozzi at the Goldman Sachs 10,000 Small Businesses Summit to discuss recession risks and how small businesses can navigate inflation and other economic concerns.
JARED BLIKRE: Tech valuations have been hammered as the bear market rages on, and that includes valuations for private companies such as Klarna. Yahoo Finance's Brian Sozzi spoke with prominent fintech exec, Jackie Reses, about the outlook for the sector. Reses also sits on the boards of Affirm, Endeavor, and New Bank. Take a listen to what he had to say.
JACKIE RESES: The one thing, if you're a small business, you need to pay attention to is, preparing for when things go sideways or south. And so there are two things that I would recommend a small business do. One, do the financial prep now. Make sure you run through downside scenarios so that you understand where you have weaknesses. Make cuts. Make adjustments. Do what you have to do. But be well planned.
The second thing you should do is make sure you get access to financing now when you don't need it. The best thing you could do is have credit availability, either through online technology tools or through a traditional lender. And so I would advise small businesses to go out, look for financing, make sure they know what all their options are, and be prepared.
BRIAN SOZZI: How would you compare the funding or access to capital environment today compared to the last recession?
JACKIE RESES: Well, the last recession was more of a debt crisis. Then today, it's more of an inflationary crisis. And so we've got very different dynamics today. And so the challenge facing small businesses today is that around cost inflation. So cost of staff, cost of goods, supply chain challenges. And all of that means that there's cash flow challenges that small businesses need to be more vigilant than ever in managing their cash flow.
BRIAN SOZZI: Is the economy going south?
JACKIE RESES: Well, today, we've got incredible jobs numbers from last week. We've got great employment numbers overall. But there's a lot of challenges looking forward in terms of dealing with supply cycle challenges associated with the Ukraine war, associated with continued inflation. And so I think there's a lot of economic uncertainty that's plaguing companies.
And so if you're not feeling it today, and we're starting to see some of the numbers come in a little lighter than expected in terms of consensus guidance on US public companies, then you should at least be prepared for it because a lot of folks would say that we are coming into a more challenging economic time.
BRIAN SOZZI: And Jackie's modest here. She's also on the boards of Affirm, Endeavor, and New Bank, right?
JACKIE RESES: Absolutely.
BRIAN SOZZI: So let's step back from that. What would you say is the mood in fintech at this moment in time? We've seen valuations come back a lot. There's concerns about there in potential consolidations. How do you see it?
JACKIE RESES: Well, if you look across fintech, there's been significant dislocation in the public markets. And companies have a reset in their market multiples. It's been fairly significant since the first sign of inflation mid-November at the end of last year. And so whenever you have a reset around rates going up, you're going to see companies like fintech companies be impacted by that from a market multiple point of view.
Now what you're also starting to see is the dislocation hitting private companies. And you're seeing very large resets in valuation on the private side as well. Despite that, there's still incredible companies in the fintech sector that are seeing incredible strong growth today, even with some of the challenges in today's market environment.
BRIAN SOZZI: The down rounds have been remarkable. What's the end game here?
JACKIE RESES: Well, the end game is that great companies will continue to thrive. And so their revenue growth and their profitability might take a longer journey than a straight line up to the right. But companies that are great companies, like many of the public fintechs, will continue to thrive in any environment because their businesses are, in many cases, incredibly impressive, strong, resilient companies. So I'm expecting there to be haves and have nots. The haves, some of these bigger public fintech companies, I would expect to see do quite well through this environment.
BRIAN SOZZI: Do they become consolidators?
JACKIE RESES: They could. They could. In fintech, you haven't seen a huge number of companies be strong consolidators. You're starting to see some more of it as of the end of last year. There's certainly a lot of folks sniffing around. Even traditional companies starting to look at some of the fintech companies where the valuations have really put them in a place that they could be consolidated. And so that gives more traditional companies an opportunity to look around at technology opportunities that they didn't have before.
BRIAN SOZZI: Do you think we are near a valuation bottom? Because I'm thinking about all the discussions I've had at this event. And it's clear that rates are going up. And they might be going up more dramatically. Does that cause another reset in fintech?
JACKIE RESES: Well, I think the next six months is going to be a really challenging time. And I suspect we're at the bottom. But I'm also seeing some challenging-- continued challenging times on the horizon around supply chain, around oil and gas. And so with that, I think it's going to be a rocky road for the next six months.
BRIAN SOZZI: Lastly, you've had a really interesting career. What made you get involved in fintech?
JACKIE RESES: I've spent my entire career in financial services, creating esoteric financial products. And so whether that be in the context of a private equity firm or in the context of a company like Square, where I worked up until a year ago, it's still a place where you can create products that are new to financial services to help bring more people into the aperture of the system and change the way finance is done. It's one of the biggest market cap sectors in the US economy. And it's also one of the oldest, which means that there's plenty of room to make changes that could change business and consumer lives.