Facing Uncertainty: Lessons Learned from 2008 to 2020 by Jay Bregman, Thimble CEO

As a career-long entrepreneur, I signed up to roll with the punches. So at this inflection point for the startup community and the world, I wanted to reflect on the lessons I’ve learned and share how we’re applying them at Thimble.

2008: Everything Was Moving Forward

In 2008, I was 28 years old and living and working in London on my first startup called eCourier. It was my first job out of graduate school. The idea was simple: handheld computers (known to the world as “smartphones”) were becoming cost-effective for courier companies to buy and distribute to all their self-employed couriers which unlocked the potential for real-time automated dispatch. We built an algorithm, lovingly called “Larry,” which knew the locations of the couriers, weather and traffic, and could allocate and stack orders programmatically. In 2008, this was beyond state-of-the-art.

Figure 1: Larry

We raised a few million dollars from a venture capital firm called Logispring (They don’t exist anymore–more on that later) which followed some seed money from amazing investors like Esther Dyson.

We were all about growth.

We had a sales team, we closed big clients like Goldman Sachs, Morgan Stanley, and Harrods, and we were a fully 24/7 operation. At the time, our big office in Whitechapel was so undesirable the UK’s government was paying people to set up there, but over the next few years the neighborhood would become Shoreditch — one of the hottest bohemian areas in London.

Our branded vans, with their cheeky messages and “Happiness Delivered” tagline, became regular fixtures in London. Everyone seemed to have seen one or been nearly killed by an overzealous driver keen to make it to their next stop.

The Higher They Rise…

Purple vans, a “pre-hip” neighborhood, and fast success — then it all came crashing down. I had no real conception of unit economics in 2008, but I did know that companies that grew faster appeared to raise more money. So, we took on big clients, discounted heavily, and paid the couriers an hourly fee rather than a percentage of the job value. We were losing money on every delivery. In normal times, we could have kept this going for a few more funding rounds, at least. But these were not normal times.

Our deliveries cratered. Customers went bust. Competitors started lowering prices in hopes that they would sustain enough business to keep operating, putting pressure on us to do the same. We were running out of cash. To make things worse, the pound, which was riding high at $2.00, dropped 27% in 2008. Not so great if you’re being paid in pounds and paying off student loans in dollars. It was a disaster, and I was totally unprepared and shell-shocked.

What was most frightening was the decline in our out-of-hours (7:30PM to 7:30AM) deliveries. This business is generally lucrative and consists largely of bankers sending deliveries to other bankers to help close large deals. It turns out it’s also a significant barometer for the overall health of the economy. I created a chart of UK GDP from Q1 2008 to Q4 2009 versus eCourier’s night deliveries, and you can see the correlation.

Assessing the Damage

The lessons I take from 2008 have nothing to do with the business decisions I should or should not have taken at the time. Everything happened to me, and I was constantly reeling and shelling up for the next economic blow. I lost so much weight my mother started to get concerned. I don’t remember if I slept (which tells me probably not), and I remember thinking that the entire world had taken on a grey overcast, like someone had put a camera lens filter in front of my eyes. At least, I thought, I had my equity.

While we were negotiating investment terms with our main venture investor Logispring, another bomb dropped. We got a letter from TNT, the large logistics company which was at the time the main LP, or limited partner, in the funds. They were taking back control of their money and wanted us to send them our funding requirements directly. The General Partners of the fund (the people who make the investments and sit on boards) were fighting the LPs and investors like TNT in court all over the world. Lawyers argued over who should vote on our board at the next board meeting. Eventually, TNT decided to make an investment directly, but at a brutal price.

Lesson 1: Calm At All Costs

When you first start sparring in boxing, the first thing they teach you isn’t about which punches to throw, or even when — they teach you to stay relaxed. This is very hard, because you’re fighting your body’s evolutionary instinct to avoid getting hit in the face. But once you can maintain a state of real relaxation in the face of danger, the world slows down, and you start to see opportunities that you never noticed when you were on edge.

So, the biggest piece of advice I would give my younger self to manage through a crisis is to manage yourself and keep calm at all costs. There is opportunity for every business in every disaster, and if you’re able to take care of yourself you just might see it. Sometimes it’s as simple as a much smaller field of competitors at the other end. Sometimes it’s just gaining the scars and the experience of having lived through a crisis. The best lesson for keeping calm in the ring is more time in the ring. Or, as Muhammad Ali said it, “I hated every minute of training, but I said ‘Don’t quit. Suffer now and live the rest of your life as a champion.” Put the crisis in context as training for the good times ahead.

Lesson 2: Habits Will Guide You Through This

I have found there are a few simple habits you can develop to keep calm while the world is falling apart. They are especially relevant in a pandemic because they will work to maximize your physical health and resilience:

1. Pace yourself. There are 168 hours in every week. Use them as smartly as possible. This does not mean doing everything. It means acing the right things, ruthlessly, and that’s it.
2. Recover. To use a weightlifting example: “You don’t get big and strong from lifting weights — you get big and strong by recovering from lifting weights.” And both physical and mental recovery take more sleep (and more food) than most people realize. The easiest thing you can do to put architectures around this is to go to bed and wake up at the same time every day. I bracket at least 10 hours to account for bad nights and ensure that, no matter what, I am well rested. You should think of this as a prescription. For more, I recommend you read Matthew Walker’s excellent Why We Sleep: Unlocking the Power of Sleep and Dreams.
3. Stay Active. There is tons of free online content of exercises you can do with your bodyweight or common household items. Now might also be a good time to invest in gym equipment so you can get stronger, while everyone else may be getting weaker.
4. Embrace Routine. A teacher once told me that boredom was the result of too much routine — or too little of it. I believe the latter part to be very true. Chaos is draining. Structure your day like never before, and make sure to block out time for you to unwind for an hour during the day. I commit to unplugging for lunch every day.

2020: Finding Clarity (for Me & My Company) Within Chaos

When you take all of these self-care measures, you will see the opportunities in all this madness with astounding clarity. For example, this week I read a WSJ Op-Ed by Evan Greenberg, the CEO of mega-insurer Chubb. It is a well-thought-out and well-written article about the legal and political threat of insurers being forced to pay for losses related to the virus they did not insure.

For context, many insurers and brokers sell business owners policies (BOP) which cover general liability (things like slip and falls), property liability (to cover stolen laptops or a vandalized storefront), and, in many cases business interruption insurance (loss of income due to a fire that forces your store to close but NOT from government shutdowns related to COVID-19 or any other organism). The exclusion goes on to specifically state that it applies, among other things, to “business income,” i.e., business interruption.

ISO’s July 6, 2006 circular [LI-CF-2006–175], prepared as part of its filing of the exclusion with state regulators, makes specific reference to such viral and bacterial contaminants as rotavirus, SARS, influenza (such as avian flu), legionella and anthrax.

According to The Washington Post, one-third of US businesses have some form of business interruption coverage. Large businesses will probably deal with this issue amicably — they will negotiate with their broker and insurer and in many cases will be able to work out a premium plan with future discounts to cover any disputed sums without having to resort to litigation or having the insurer admit they are making an ex gratia payment. Insurers don’t want to lose their business, and these customers recognize they can move their significant business to another insurer.

Small businesses, however, don’t have this luxury. Insurers will view the risk of making any exceptions or ex gratia payments as extreme — on what basis could they deny similar claims from other businesses? So, there will be epic litigation in federal court, with what’s known as multi district litigation, or MDL. There will be a class created which will include one-third of US businesses, all of whom can be reached because insurers have their contact details from selling them the policy. Since most of these businesses are shut down and suffering, they will probably sign up for the lawsuits.

So, as early as next year, the insurance industry could be fighting a massive federal lawsuit against one-third of American businesses, but particularly small businesses. As these businesses restart, will they really stick with the insurer who they’re fighting in court?

I took these ideas and wrote an op-ed “How to Fix the Glaring Problems with Business-Interruption Insurance,” which was published by Barron’s on Friday, May 1st. I think Thimble is in a great position to lead the conversation on the next generation of business insurance. I’m excited about it; opportunities like this don’t come often.

There appears to be a correlation between the genesis of great insurance brands and cataclysmic events. USAA launched a few years before the Great Depression and Progressive and GEICO were founded just before WW2. I think this is because human nature is to fear what is recent, and then to gradually forget. This “availability bias” has been studied regarding specific risks (e.g. floods), but I believe it may have deeper relevance when we experience a true life-changing disaster. People become risk-averse. Insurance sells itself.

My experience at a startup in 2008 taught me that in times of disaster, there is a huge premium on both capital and clarity. The capital you have available may be beyond your control, based on where your business happens to be in the funding cycle when the world tweaks. But clarity is always in your control. Use it wisely.