Two weeks ago, this Sequoia post was ahead of the curve. Kenya hadn’t yet experienced its first confirmed case and the US was still mocking the preliminary asks to limit in-person gatherings and think about self-quarantine. Since March 5, most of us have had a significant shift in our perception and planning. The minute that shift occurred differs for everyone — conferences canceled, gyms shuttered, flights turned away. All things we can live through.
What’s getting real, fast, is the scenarios our portfolio companies have to deal with. As of last week, Sequoia’s advice was outdated. This week, it is clear to our CEOs that sales will suffer, and cash could become an issue. If it isn’t, we probably picked the wrong CEOs. Many investors are still sending the Sequoia post, however, which now comes off as not only obvious but callous in what is a rapidly evolving and scary situation. I’ve had no fewer than four co-investors send this article to CEOs then highlight the advice on how to extend runway. Stop. Trust that your CEOs are already worried about this, instead let’s focus on supporting the aftermath as this virus rips through people’s lives as well as company financials. There are lots of ways to do this, but I’ll share BHI’s approach here. Please share if other ideas or best practices have come up!
1) Team. Reach out with a team-first approach. The number one question is, are your employees safe? It quickly became a given that travel should be canceled and work from home implemented for everyone possible. But, if everyone can’t work from home, what is the company doing to protect them? Are there extraordinary measures, i.e. childcare allowances, personal uber budgets or protective health measures that should be implemented? As the Sequoia post alludes, there’s lots of advice out there, but I think it’s important for us to give strong and emphatic permission that companies may have to spend a bit of money to keep people safe.
2) Vulnerabilities. We all acknowledge things are going to get hard, but let’s avoid panicked decision making. Where are the company’s financial vulnerabilities in sales and expenses? How can we get creative on mitigating these or planning to reforecast for 2020? Where along the supply chain will shutdowns and transportation slow downs come into play? This is very different for each of our companies. Field, our newest portfolio company, will weather the storm — the team is stepping up deliveries and adding high demand personal hygiene products. Our B2B companies are likely to have bigger issues meeting targets. How can we help think through this impact in a quarantine of uncertain length? Though the economy will be challenged, how quickly will the bounce come once the disease is brought under control?
3) Opportunities. Field is working with pharmacy clients to set up in-store handwashing stations to support staff and customers, admittedly it’s also a branding exercise. One company has realized that its office configuration could be smaller. We’re all realizing that defaulting to video is a nice way to feel connected across time zones. This isn’t “how do we profit from others’ misfortune,” it’s looking for small good things to keep our sanity. My atrocious carbon footprint is also significantly abated for the next 60 days.
4) Fundraising. Depending on where people were in their cash burn cycles, each company has very different needs. Blue Haven is prepared to write checks in cases where business fundamentals have not changed, but operating environments have temporarily gone haywire. Being an entrepreneur is hard (particularly in places like Kenya and Nigeria!) when the conditions are perfect, but Covid-19 goes in the “wtf do we now” bucket. This doesn’t mean indefinite bridges and continued spending without consideration of the new reality. It does mean we continue to believe in our entrepreneurs and the business and people we backed over the last five years.
5) What can we do to help? Probably nothing, but we’re here to talk and brainstorm when you need it.
Coronavirus sucks. People are suffering. Most economies are getting taken out at a high point. At least the US was due for a recession and figuring out how to weather a period of austerity is usually a teaching moment for the best companies. Avoiding the growth-at-all-costs mentality seems more in vogue today than it did six months ago. None of us know where this is going, but we do know that we’ll get through it.