Adapting to Endure: 18 Insightful Tips for Startups to Survive in 2022

8 min readJun 13, 2022

Roman Tyan is a venture capitalist and startup mentor with over 15 years of experience. Roman has worked in senior positions at the leading Eastern European venture funds with total AUM of $610m, founded his own startup AnyWay, and become a mentor at tier-1 startup accelerators Alchemist and Techstars. In 2021, Roman started a new generation venture capital fund, NRG Ventures. In this blog, Roman shares his experience and insights in venture capital and global technology business to help entrepreneurs and B2B startup founders succeed.

I was on a 6-hour flight where I read Adapting to Endure, a rather insightful guide for startups by Sequoia. In this article, I want to share my takeaways from it, as well as some additional thoughts based on my personal experience.

Please note that these tips are designed for early-stage B2B startups.

Adapting to Endure by Sequoia | Source: Fortune

The global crisis (financial, food, and humanitarian) is already her. The costs of capital are rising, which will soon impact companies at our stages (note: seed stage). Perhaps you have felt it already. Burnout, bankruptcy, and failure risks will only increase as long as you don’t adapt and prepare for it. Here’s what you can do:

#1

Cut the costs, leave the essentials. Here are the examples of such an approach:

Airbnb decided to cut on almost everything, and invest more in core hosting and longer-term stays instead;
Zappos cut the marketing costs but invested in customer service, selection, and engineering.

If you have CapEx costs, you can cover them by installment or pass them on to the client/bank partner.

#2

Cut the marketing costs, build partnerships, use barter system. Keep in mind that social initiatives can easily bring in free clients too.

When I was the CEO at a carsharing startup, we were quick to spot an opportunity (as we “felt” the market) and implement it immediately, which resulted in an influx of thousands of clients for free. Another similar story happened with one of our portfolio companies, UVL Robotics. Their founder and I once discussed drone rescue operations after 2021 European summer floods. He was then quick to implement this idea in Oman, where a massive flooding disaster happened. Not only did the company help the region, but they also were widely publicized and got a lot of new clients as a result. All it took was a few drones, a few sleepless nights, and an ability to react quickly.

Oman — Floods After 200mm of Rain Leave | Source: FloodList

#3

Set the hooks:

a) Partner with global corporate marketplace integrators such as Microsoft, AWS, Nvidia, SAP, Google, EY, PwC; or smaller ones like Miro or Personio;

b) When I advised at several startups, becoming a member of specialized associations also worked quite well within the EU market. Such memberships typically cost around €10.000 per year and enable companies to find target clients and partners, organize educational webinars for them, and participate in private events.

Let your solution sell itself!

#4

Build a referral system and give hundreds of people the opportunity to earn with you: include 10–20% in the price for referral payments for the first year of the contract and up to 5–10% for the second year. You can also consider staggered percentages when your referrals make money from the clients brought in by their referrals. It is because of such system, Amway works pretty well even in times of crisis.

Source: King 2021, Sullivan/statista 2020 via FinancesOnline

#5

Redefine your target market. There is a possibility you should refocus from highly competitive markets to the ones that are more “technology craving”, such as MENA or GCC (e.g., the whole MENA region is about 700 m of population which is higher than both the US and EU together).

#6

Sign customers for long-term contracts, ask them to make a deposit on highly favorable terms, give them discounts and perks that they can’t refuse and create a loyalty program. At my carsharing business, we built a simple model with very attractive terms. As a result, lots of clients made a deposit and some of them never used it in time, which eventually gave us the same regular margin.

#7

Diversify your business. To put it simply, if more than 50% of your revenues come from one client, it is not okay; if more than 80% of your revenues come from the same service/product, it is also risky. I’m not necessarily saying that you need to engage in a non-core business, but you can sweat a little and help a corporate client optimize their operations by integrating third-party technological solutions (where you can also earn on referrals). The customer needs a solution to a problem, and the last thing they want is to deal with dozens of providers. By integrating key services into one customer solution, you create such conditions when your customer “gets addicted” to your solution. This is a stable profit with 0% churn — a perfect solution in any crisis.

#8

Stock up on cash for at least 12–15 months: attract bridge financing, get cash upfront from a client, or secure with capital debts (which is offered by Mercury, for instance).

#9

Try to gain traction as fast as possible, as each day of downtime will now cost you more and more.

#10

It is highly advisable for you to reach profitability during this time.

#11

If you are to make SAFE(s), you have to consider the possibility that the next Equity Financing round can be 2–3x times lower than your current Cap rate. If your Cap is at a discount, you should simulate the CapTable to see how much you will be diluted. It is important for founders to keep at least 50% (f/d) at Series B stages.

#12

Prepare to have your company’s valuation 5–7x the annual revenue by the end of the year.

#13

What you need to sell corporate clients is real value such as cost reduction, and not vague and general ideas. Let them know how they can save more.

#14

Do not hire highly paid salespeople or other staff. Instead, you can create a strong advisory board out of your potential C-level customers by selling them your vision and offering a stock option plan that can then make them rich. Ideally, they should confirm their commitment by micro-investing in your company.

You have to create the board that would work for you and would bring in corporate clients.

#15

Build an army of salespeople at a total price of one US salesperson. Start selling your products even if it is not ready yet (as it will never be completely finished). You can hire a part-time remote mid-level salesperson at $1000 a month with an increasing sales bonus. The best ones can be promised a stock option plan in a year.

Staff cuts all over the world are only going to increase, and it will become common for 2–3 employees to work remotely while living in a low-cost location. These are highly motivated people who can outperform the top overpriced salespeople with their diligence and eagerness to work.

#16

Due to the layoffs and job reductions globally, thousands of top specialists become unemployed. You can hire them on favorable terms or even offer them a part-time position until they prove their commitment.

#17

I always stick to the principle that everyone on the team should get stock options. In case with NRG Ventures, everyone gets a carry. This allows us to a) increase employees’ loyalty and make them feel like they are the co-owners too, and b) pay less fixed rate.

You can create an employee stock option system the way you wish you’d have had when you used to work for someone else.

And it’s not measured in percentages, but in the number of shares an employee can buy at a favorable price and make money on the difference. Suppose you issue 10% of all shares for stock options to current and future employees: you distribute 5% now and leave 5% for future employees for the next couple of years. Suppose, 5% of shares is 1.1 million shares (if, for example, there was an issue of 20 million at the beginning), you can allocate stock options for top managers of 60% of 1.1 million and leave 40% for the rest. Also, not to forget about vesting: for instance, the CBDO will get the right to buy 66,000 shares at $x, but they get the rights gradually over 2–3 years with a link to the KPIs. In 5 years, they will be able to sell these shares at $y, which is, say, 10 times the price. The capital for the employee to buy options can be provided by special services or current investors. It is possible to make additional option issues at each subsequent round to maintain the level of 7–10% on fully diluted basis.

#18

Revise and rethink carefully your company’s mission and values. Build a team of people who share the same values and don’t put money first. In uncertain times, such teams are difficult to break. Communicate with the team more frequently, support them, hold open informal Q&As of employees with founders every two weeks, reward everyone who works hard and offers development ideas — listen up!

When you keep your team in the dark and withhold vital information from them, they begin to burn out.

Be honest, and establish trust. It can happen that a buddy of your young specialist’s father will turn out to be your client and investor. Everything is possible.

NRG Ventures — is a new generation venture capital fund that supports global B2B technology startups founded by immigrants from the former Soviet Union countries (FSU).