Founders are facing tough decisions today — how you make them defines who you are
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I want to talk candidly about a couple of important considerations for startup founders in today’s environment.
Making tough decisions
Some founders I spoke to this week are preparing for headcount reductions of 30–35%, renegotiation of vendor contracts and customer relationships.
This is fun for nobody.
I shared a note with our portfolio over the weekend to give my two cents:
1. Not just your reputation, but what you stand for will be defined by the way you act now:
Everyone understands that it’s a time to make tough decisions. But you will be remembered by your team/suppliers/customers in how you enact these decisions.
This is not to say you’re here to make easy decisions. You need to survive today to have a chance to thrive tomorrow.
So take the time to carefully articulate the calculus driving your decisions to convey your vantage point. And ensure you treat all your partners with deserving respect.
2. Think about how your business realities will structurally change once this settles:
While we can’t predict how things will look, it will not be back to business-as-usual after this lockdown. Your customers are going to come out of this transformed, with new behaviours/problems/opportunities.
Instead of making changes towards ideas you’ve had in the back of your mind, take a step back and think about how the world might look once the dust settles.
Fundraising
Compounding the uncertainty faced by founders today, there is a divergence in the investment world between the public narrative by VC firms and the reality on-the-ground.
Practically overnight, the prospects of fund’s portfolios have changed significantly. It’s only natural that VCs are heads-down triaging their portfolio:
Who has the shortest runway? Where do we cut burn? Is the impact on business health cyclical or structural? Where do limited resources get allocated?
While there will likely be haircuts on Seed valuations to compensate for cascading dips across the board, it’s the prospects of post Series A companies that will be impacted most.
At that point, startups are not simply validating a loosely-known opportunity, they’re real businesses whose decisions are made on numbers.
And these numbers will be fundamentally different depending on what the world look like when we come out of this:
To what extent will discretionary spends be affected? How will spending patterns change? How will the lasting restrictions (e.g. 1m distances between people) affect an ability to fulfil revenue potential?
These are big unknowns. It doesn’t mean investments won’t happen. It simply means inertia: where possible, people want to wait to see what the world will look like. So re-orient from where you were 2 weeks ago.
Ps. that being said, we’re pretty free so approach us if you’re at seed and need to move quickly ;)
An important note
Covid is already hitting daily-wage labourers harder than any of us.
If you have made it all the way down here, I would really appreciate if you could consider making a donation — however small — to helping feed their families:
Here are a couple of other helpful resources from around the web:
- How to cut expenses
- Dealroom crisis impact deck [PDF link]: Tl;dr: skip to slide 9 and use the framework to think about cyclical vs. structural changes for your business — this deck is US centric so note that the impact will be quite different in India.
