Nevertheless, She Persisted: Holly Liu Shares Advice to Founders About Braving Hard Times

Concerned about how to navigate these uncertain times while operating your startup? Here is some practical advice from someone who has been there, and whose company “lived” to tell the story.

Holly Liu is the co-founder of Kabam, a mobile gaming company. In 2008, Kabam’s Series B term sheets were signed. On the day the money was to be wired, Lehman Brothers and Bear Stearns collapsed and the Great Recession of 2008 began. With no investment coming and ad revenues disappearing, Holly and her team pivoted and built Kabam. In 2017, it sold for $1 billion.

No doubt, we are in a historic moment as the world hunkers down in this global pandemic. The ensuing financial downturn created by the pandemic is no friend to company founders. Holly Liu shares what she learned during the 2008 recession, providing guidance for companies on how to navigate through the uncertainty.

If the company you are creating right now can survive during this time, you are actually thriving!

Use this time to build a profitable business.

Get to cash-positive as soon as possible to give yourself runway (at least 18 months), which includes expense-reduction measures:

• Renegotiate all possible contracts
• Realize savings with the stopping of free food and happy hours, and cut other modern non-essential perks
• If necessary, furlough or layoff non-essential staff
• Ask those who are able to take pay cuts, possibly offering stock options as a substitute

Consider a pivot or other big changes to your current business plan.

Kabam started off as a Facebook community apps company, solely dependent on unpredictable ad revenues. The day the Great Recession started, their ad revenue went to almost $0 overnight. They had to find a business model and business that was not dependent on ads. Losing ad revenue streams focused them on building value for the end customer — creating a more lucrative, easier-to-monetize online gaming company.

• Embrace change — it may be a better path in the long run
• Bias towards action — Don’t be afraid to rip the band-aid off, because sitting in the malaise is worse than meeting the challenge head-on

A startup has two things at their disposal that many other businesses do not have: speed and agility — use them now.

If VC wants to give you money and you need it, take it!

If funders are still taking your meetings, keep trying to close, especially if you are deeper into the fundraise.

• Create a sense of urgency by bringing two quality investors to the table and see if you can generate FOMO (fear of missing out)
• Leverage existing investors as much as you can
• Consider a convertible note or look at syndicate strategies

Look for other sources of funding.

Venture-backed models are not the only game in town. Here are some other ideas:

• SBA loans may be available for companies who qualify
• Surge funds may give money based on a company’s revenues for smaller D2C businesses
• Debt can be there, but be mindful that it is not like equity

The best source of money will be from your customers.

• Do a local sales push while customers are driven to help local businesses stay afloat

More on fundraising from Holly’s blog, Founder Musings: Fundraising in a Pandemic:

Fundraising is very much akin to surfing. If you want to surf, first waves need to be happening. The surfer cannot make these waves happen. The waves are the capital market. The second thing is that these waves need to be at a beach you want to surf at. The beach is your industry. Finally, the most important thing is when the waves are happening you are able to go out there, stand on the surfboard and catch that wave. That you have full control over. That is the operations of your business. Can you build a profitable business?

Continue to build team morale.

Everyone is seeking a sense of hope and community, especially in these difficult times. It’s important to:

• Candor and urgency — Strike a balance between positivity and transparency by being honest and forthright, while not being too “doomsday”
• Build a foxhole mentality with employees and remind them you are all in this together
• Create new rituals online, such as virtual lunches, Zoom game time, Friday afternoon karaoke via video, or even a fully remote team retreat

Focus on mental health strategies.

Everything feels 10x more emotional right now.

• Take mental health breaks every day and find some useful practices, such as journaling, breathwork, meditation, prayer, etc.
• Recognize your emotions without judgment and let them exist as they are — they are trying to tell you something
• Find gratitude in everyday life and be thankful for all that you have

Regret brings you to the past.
Worry brings you to the future.
Gratitude brings you to the present.

While Holly has no crystal ball, she does believe that there are opportunities in downturns — you just need to keep your eyes and ears open to them. These are crazy times, but if you can survive this you will be much stronger for it.

Determination requires a ton of adaptability and flexibility.

Holly recently served as a Visiting Partner at Y Combinator and writes a newsletter called Founder Musings. Follow her on Twitter @hollyhliu.