The future is more cloudy than clear. We can’t see more than 10 feet in front of us. What we are living right now is probably a defining moment for an entire generation.
I always prefer to see the glass as half full rather than half empty as entrepreneurs have the ability to rapidly adapt, being smart, and agile to innovate.
So I’m sharing here my notes & thoughts for early-stage startups gathered from great resources I encourage you to read, listen, watch (links at the bottom). I’ll continue updating on the flow as my only certainty now is that we know what we don’t know and I’m just here humbly scratching the surface.
Bottom line we need to think of our businesses with a goal of better efficiency and find creativity with pragmatism. “An entrepreneur does more than anyone thinks possible, with less than anyone thinks possible.” John Doerr
Getting back to the basics, to the roots, can help:
- Purpose: why are you doing it?
- Vision: where do you strive to get?
- Mission: what do you do to accomplish the vision?
- Values: What is your culture, your beliefs?
- Strategy: What is your plan to achieve this vision?
- Tactics: What actions do you take to implement your strategy?
- Goals and objectives: How do you measure progress toward success?
Do you remember 2012? Everything was SOLOMO (social, local, mobile). In light of this crisis, there might be areas of opportunity to revisit.
The situation…
- This context, which is constantly evolving, is the ultimate test of entrepreneurs’ resilience. Entrepreneurs have to gather their skill sets and each of them needs to be at their level real leaders.
- Community and network are key, there is no safety net but communication with other entrepreneurs either those experimented or those who experience the same situation is key.
- There is no playbook for covid, best playbook, for now, is common sense, pragmatism the road ahead is unique, it’s an unexplored territory. So your response will be unique but we can try to put in place a timeline to normality.
- Unexplored territories mean we basically don’t know, when it ends, how. History shows that for a market that loses 20% takes approximately 540 days to get back to it’s new normal. And this will probably mean just hitting a bottom line.
- We should not underestimate the severity of the crisis and anticipate the domino effect. Consumer spending drives our economy. Everything is inextricably linked. There will be probably a permanent shift in how people consume.
So what do we do?
- Shelter in place the company: close the hatches and go into a waterproof mode
- Take time to self-diagnostic the company and what you can learn now to be implemented later
- Build trust with your team:
> Internal communication is key, be realistic, transparent, and do more all-hands meetings than usual.
> Employees can genuinely play multiple roles
> Being Human 1st — Reid Hoffman “What are the things I should do 1st as a human being in these times?” - Accept the uncertainty: we know that we don’t know, yet identify what uncertainties are core to your business
- Learn to navigate uncertainty:
> Reassess the framework weekly and move quickly and smart to allocate the resources.
> Recalibrate the priorities
> Draw a worst-case scenario such as “2020 is scratched” and start for there
> Define objective you can control, monitor
> Identify massive supply/demand imbalances.
> Don’t be afraid to try new things
> To survive a company needs to do the right things even if they are executed poorly. So it’s all about strategy, not tactics
- Your job is to imagine how the company will need to be different and it can go very deep: Business model, go to market, product-market fit
- Cash is king
> It’s your life insurance policy for the next 18 months so make it last!
* Learn frugality: watch every dollar!
* Cash position becomes company strategy, and pushing toward breakeven can be the right aim. (James Currier)
> If you raised a Series A get that money to last you minimum 12 months preferably 18 months from now (Reid Hoffman)…
> Yet, make sure it is to implement the “what’s next”, the goals cannot only be to survive.
* Keep playing to win, not just to survive, keep growing, small numbers matter
* Unexpected opportunities might already be at your doorstep: market, team, customers (as the governments will likely become customers of many digital companies, Corporates will aggressively embrace digitalisation…), product usage… - Cutting costs is less challenging for early-stage you can more easily manage the burn, get back into being frugal and bootstrap again. Just be rational and practical in your cuts decisions.
> If you have to do a RIF, how can you help people get their next job? - When you have implemented where to tighten your belts, think about actions you can take to get operationally ahead of the business so that you can push on the green button when the recovery begins.
- Fundraising will be a painful process that will take much longer. Be prepared to get bridges with a flat round in the best-case scenario.
- New financing for new entry players will be very challenging.
> If you are in the middle of fundraising and you already have contacts, then it could be a good moment to test the VCs you are talking with and see if they are the partners you want
> Proactively come back to the VCs you are talking to with your new numbers, scenarios. This may change the initial terms but may trigger the deal to happen.
> Approach Angel investors in a mentorship way based on engagement and transparency and prepare the field for a financial relationship later on. There is a huge human component here. - Customers also are kings.
> Don’t forget sales!
> Be careful you don’t want to lose your customers for the wrong reasons
> Learning from customers will help you to set up the ground for the wise evolution of your product or service. Consumption till today was really based on a pull experience, now everything has moved to a push experience, no more room for serendipity
* Where can you create a deep level of engagement?
* How do you make sure you establish a loyal following and draw consumers to the products
> Which customer segments are still more likely to buy as everything starts to be more and more intentional, selected
> Emphasis on customer support
> What will drive your pipeline?
> Consider offering services that will later convert people into buyers like hosting webinars, produce content, free trial… the objective is to engage your community and provide personal values to individuals
> Reassess all your marketing channels and their cost-effectiveness focussing on channels that deliver rapid payback - Relative speed matters move faster than the competition, even if it seems slow pace, stay ahead BUT, be very efficient in spending
- Don’t rush into trends: “there are some things that will look like lessons this year that are actually only lessons for this year. Not lessons for 2021” Reid Hoffman
- You are a missionary, not a mercenary (John Doerr). You are leading your company for the right reasons and will find solutions. Because creativity is what makes entrepreneurs different.
- Use the moment to recalibrate, your company may have the opportunity to become a better version of itself in the long run.
Reid Hoffman
“The natural impulse for people is to help around but there is nothing wrong is saying “I’m focused on my startup and my business first because that’s creation of jobs and industry.” I mean we’re going to be in X quarters recession. And the question is is it a small number X or a large number X? Is the only real question with that. […]
Most relevant links updated 04/27/20
Fund Raising
The Burn Multiple David Sacks
https://medium.com/craft-ventures/the-burn-multiple-51a7e43cb200
Fred Destin VC terms — Return of the barbarians https://medium.com/@fdestin/vc-terms-return-of-the-barbarians-77149fe2be88
Navigating the crisis
Crisis Guide by First Round: https://firstround.com/review/the-founders-field-guide-for-navigating-this-crisis-advice-from-recession-era-leaders-investors-and-ceos-currently-at-the-helm/
Mary Meeker’s Coronavirus Trends Report: https://www.axios.com/mary-meeker-coronavirus-trends-report-0690fc96-294f-47e6-9c57-573f829a6d7c.html?utm_source=morning_brew
It’s time to build Mark Andreessen: https://a16z.com/2020/04/18/its-time-to-build/
Greylock, David Wadhwani Finding opportunity in a crisis: https://greylock.com/finding-opportunity-in-crisis-what-ceos-should-do-right-now/
NFX, Pete Flint 28 moves to survive & Thrive in a downturn: https://www.nfx.com/post/28-moves-survive-thrive-downturn/?utm_source=twitter&utm_medium=social&utm_campaign=internalshare-pete
Thomas Crampton interview with Joanne Ooi: Pandemic-driven consumer change
https://www.facebook.com/thomas.crampton/videos/10156855506420870/
NFX, The new rules of growth vs profitability: https://www.nfx.com/post/new-rules-growth-profitability/
James Currier conversation with Reid Hoffman The Great Reset https://www.nfx.com/post/the-great-reset-reid-hoffman/
