The past few months were exceptional for everyone across the globe and startup founders are also feeling the heat of this fast-changing landscape.
As a founder & investor myself, I know things are hectic for every founder with the external uncertainties escalating with many unknown unknowns still in the play.
Sharing a distilled version of my discussions with fellow investors and startup founders across Asia, Europe, and the Silicon Valley ecosystem who survived the dot com bust and 2008 crisis successfully. First, let’s say a silent prayer -
Dear COVID, Thanks for bringing out the best in us. Here we come :)
I’m breaking the various points we discussed into 3 buckets and hope these are insightful and valuable to maneuver these times.
1. Leadership and Strategy
a) Time to separate “Wheat from the chaff” — The tough shall survive. Just like in war, the general communicates clearly and the troops follow, adopting a top-down approach for decisive leadership is imperative. This, however, needs to be combined with empowered decision making at the front line so the team that executes is fully involved, aware, and accountable. Lead by example and not by force.
It’s hard to beat a person who never gives up — Babe Ruth
b) Opportunity in every crisis — “WeiJi” is the Chinese word for crisis. The word itself is made up of two characters ‘Wei’ meaning Danger & ‘Ji’ meaning opportunity. It is self-explanatory that this crisis will leave some of us stronger than ever before while few will perish. To successfully survive, it’s time to uncover new channels, geographies, industries and redeploy talent to sell online vs offline. Shifting the sales channel mix might yield a long term benefit.
Even biggies like Shake Shack are taking a temporary pivot. They launched “DIY burger kits” with a free cooking tutorial. Now everyone stuck at home could recreate their legendary Shack burger.
Closer home, some of our portfolio companies have proved themselves to be ‘COVID Resistant’ crafting solutions leveraging their cool AI tech for new use cases emerging out of social distancing tracking.
c) Build a REAL Business Continuity Plan (BCP) — The world is seeing that even the Fortune 500 were not prepared for such scenarios despite using terms like BCP for long. COVID 19 will end but the lessons must remain. Who are you dependent upon? Do you have the Director’s insurance? Who has the server keys? Is it in two places? What about cybersecurity issues? Risk management should be the focus of growing companies.
Besides internal processes, tracking the financial & operational risk of other partners like customers, suppliers, and outsourced teams is going to be a necessary discipline.
d) Hawkeye your cash flows — Prioritise different colors of cash. Focus on account receivables, sequence payment to landlords, utilities and vendors, etc. Ask for credits. Understand deeply about the grants available from the Government and take help from the system. Keep a financial reserve but do not obsess over not spending. Spend less but spend right. Never a better time to brush up your financial 101.
Make new friends — Short term liquidity management, Accounts receivables tracking & Cashflow monitoring. You are known by the company you keep :)
e) If ever, this is the time to bond with your Team — You may have to temporarily offer reduced salaries but try to minimize firing people as much as you can. A good team is a rarity. Hang on to them with all you have. Do your scenario planning and invite your team to participate in the roadmap. It is best to avoid speculation due to baseless fears and anxiety at this time. It’s also advisable to reallocate tasks and retrain them during this time. Hail Coursera, Skillfuture, and Udemy!
More than 1/3 of vulnerable private-sector jobs are in firms smaller than 100 employees — McKinsey & Company April report on COVID impact.
Don’t leave it to the anxious imagination. Clear communication, involvement & collective team action on cutting costs and pooling ideas to sail through would go a long way.
f) Prove you are “weather-proof” — The markets will pick up and you need to be ready with the pitch deck and due diligence docs when the investors decide to come back in the ring with gusto. Can you showcase yourself to have survived the downturn and became more seasoned in the process? There is a lot of dry powder waiting to be deployed from the VCs who have raised funds. Proving yourself worthy of it remains a founder’s responsibility.
Honesty and maturity of presenting various scenarios with your preparedness to deal with a changing landscape will go a long way.
Get a new customer or open a new channel, trim the fat, innovate on the edges to increase the runway & and share your projections in all possible situations to win their confidence.
In fact, some of the sectors like edtech, wellness, entertainment, gaming, remote work, digital products, and essential consumer services are witnessing tailwinds.
The fear of not getting the funds is real but overrated.
Tough Times Don’t Last, But Tough Founders Do :)
Moving on to our second bucket, I’m confident you’d agree with me that during a crisis, anything that helps you increase sales and revenue should be a priority. In this regard, I am sharing what gets your ship to cross the storm:
2.Sales & Operations
a) Don’t Stop Selling — There’s a difference between when a prospect says “I don’t want to buy” and “I don’t wanna buy right now” — Understand the game and play for the long run. Keep the top of the funnel as full as possible by keeping the prospects warm. It’s a good time to ask if you have a way to reach out to global experts or reseller channels who could introduce you to the right opportunities within your markets and across borders? There was never a better time to build new bridges.
Don’t take the comfort of tech tweaks and blue-sky ideas when customers are frozen for buying decisions. Don’t sell but tell during such times.
b) Invest in the Right Tools and Techniques — It’s time to streamline costs on underused resources. How many times we have signed up for the subscriptions and never bothered to check again? As a founder, embrace the right tools for your business rather than the most expensive tools in the market e.g., Salesforce being the best in its game might be overkill for early-stage startups. Aim for boosting digital productivity for the team getting used to WFH. e.g., Do you have a good outbound lead generation tool or you are relying on good ‘ol telcon based inside sales only? Are you already following a data-driven CRM based sales funnel strategy? Can you automate your content marketing while other things are on a slow road?
Discover some new ones like ‘Sidekick’ apart form the usual suspects like Slack, Trello, Jira, and Asanas of the productivity world.
c) Experiment Fast, Fail Faster — A crisis means your regular methods aren’t working anymore. The key is to figure out what variables can help you tap new opportunities amidst this change — Hiring methods, New technology, New channels, Brand new geographies — prioritize based on what suits your mid-long term objectives and then experiment fast. Have a strong daily monitoring regime and if in two weeks it looks like it’s failing, pivot and gets the backup option in place immediately.
You Snooze, You Lose.
d) Fix the Mix — You can use the downtime to start collaborating with your prospects by bringing them online through a webinar series, interviews or podcasts so that when the markets go back to normal, they already have a warm connection with you. e.g., startups serving hospitality and airlines may have a doomsday staring them in the eye but a lot could be done to bring out the voice of the targeted customers through these means while everyone is suffering.
In fact, businesses that use emotional connections outperform their competitors by 85% in sales. A great example comes from Zappos, the popular online shoe store.
Must read recommendation — Delivering Happiness by Tony Hsieh.
e) Creative Contract — While a lot of businesses are bound to negotiate on price, give preference to flexing your norms for long term contracts, and be innovative for the short term ones. You can explore bundling through partnerships with other startups offering complementary solutions. This could allow for creative pricing mechanisms through enhanced perceived value. At this juncture, ensure all means to keep the cash flow going.
One of our portfolio companies in procurement saas business tied knots with a ‘Make your own food order & delivery app’ company with a creative offer to gain 150+ leads in a couple of weeks.
f) Avoid Free — A crisis should not steer you away from profitability. You may offer discounts but avoid offering the product/service for free. Your time at this stage is even more valuable. Your first countermeasure should be to offer additional free services, second to do some free consultations and third to offer a discount. Avoid free tag for your brand unless its part of a strategic plan or a freemium approach.
The Best Way To Predict FUTURE Is To Create It — Peter Drucker
The last bucket on what founders can do to weather the storm that awaits or has rather begun.
3. Brand Voice & Personal Wellbeing
a) Focus on the human connection before pushing value — Change all email copy, blog, sales scripts, etc to be more sensitized and humane. Its good time to detoxify yourself :)
A global survey by SAP for B2B sales practices released that 80% of customers believe overly canned, vanilla sales approach with no value or relevance are extremely off-putting while 48% feel salespeople are too aggressive.
b) Do not push your stakeholders — I mean all stakeholders viz employees, prospects, clients, investors on deadlines. In an environment of apprehension, you will only come across as insensitive to your employees and a rude capitalist to your clients and prospects. Empathy will go a long way in such a time of strife for all.
Empathy is the ultimate form of customer insight — Don Peppers, Customer experience guru
Personal Well Being:
a) Follow the Airline’s rules — Put oxygen to yourself first before taking care of all your babies. You remain responsible for your startup and you need to take care of your mental and physical well being. Spend quality time with your loved ones, indulge in some hobbies, reading and listening to motivational videos — whatever cheers you up but do not neglect yourself.
You are precious. Handle with care :)
b) Live up the New Normal — COVID has brought to us a fundamental crisis rather than a financial crisis — the economies will recover but the lessons learned can be taken to prioritize better and craft a new life with a renewed perspective on self, work and play.
Philosophically, it’s high time to get a bit of a distance from your passionate endeavors and see that everything is ephemeral. Just become your better self through thick and thin.
This too shall pass.
Stay Safe, Stay Together. Be Tribal :)
Best! Anuj Jain