How to react to COVID-19 — perspective of a startup founder
COVID-19 is spreading globally and has wide ranging impacts on society and economy.
In my role as startup founder, there are a lot of questions to be answered from a business perspective. Over the past few weeks, I’ve been talking to various investors and founders in Europe and the the U.S. I’ve been reading and thinking a lot about potential implications and actions to take. I decided to share the advice that I’ve received — hoping it’s helpful for others.
I treat this as a living document so please do reach out if you have helpful things to add.
COVID-19 Facts
Here are some great articles that explain why Coronavirus is a threat to society, why we need to #flattenthecurve and why it’s critical that we take the right measures.
Impact on businesses
Obviously, business impact largely depends on the type of industry you’re operating in. Cloud software businesses are less affected than companies in the restaurant or travel space. But every business is impacted in some way — either directly or indirectly. Anticipate that your customers may revise their spending habits. Even if Demodesk is not in the hospitality space, we do have customers providing software for restaurants. Even if Salesforce is not a travel business, they have customers alike United Airlines or Uber.
In these difficult times, it’s important to help each other. Things have changed overnight. The faster we can adapt as a company, as a society and as an economy, the sooner we can return to a “new normal”.
There will be some fundamental shifts that are likely to stay in a world post COVID-19 –e.g., less business travel, higher hygiene awareness, more companies operating remotely, an accelerated migration of on-premise software to the cloud. And there will be a large number of cascading effects that we are not yet able to assess properly. Financial systems and governments will also need to adapt to the new normal.
Here are some resources I found extremely insightful in that context:
- Actionable advice from experienced CEOs during a downturn or crisis: https://www.youtube.com/watch?v=CL9hapwEQ4k&=&feature=youtu.be
- Sequioa’s note to their portfolio companies: https://medium.com/sequoia-capital/coronavirus-the-black-swan-of-2020-7c72bdeb9753
- Bain’s CEO plan for actions to take: https://www.bain.com/insights/ceo-plan-for-coronavirus-actions-to-take-now/
- Coinbase’s guide to planning and responding to Covid: https://blog.coinbase.com/coinbase-planning-and-response-to-covid-2019-d0cb3379bc3e
- Podcast with Jason Lemkin why now is the best time to start a SaaS company: https://www.saastr.com/saas-techcrunch-why-now-is-the-best-time-to-start-a-saas-company/
At this point I assume that everybody is working from home, hopefully healthy and safe.
Summarizing advice I’ve received in 5 buckets:
1. Cash is king
If somehow possible, make sure you have 18 months of runway. If your burn is too high, think about measures you can take to bring it down. If anything, you want to ensure that you can continue operations as a company.
Make contingency plans
Adapt your business plan for different scenarios and define a set of actions to take, even if things get worse than expected. That helps you to prioritize and get peace of mind.
Adjust hiring plans
Evaluate critically whether you can do more with less and raise productivity. Put a temporary hiring freeze into place, at least for the next four weeks. Before you lay off team members, evaluate cutting back work hours and pay.
Quickly evaluate options to increase capital
Accelerate Fundraising if you have started the process. If you haven’t started the process yet, postpone it by 30 days. Reach out to your current investors to understand whether they would be able to provide you with additional capital. Focus on your company and your customers for the moment.
Make single cuts
If you need to bring down costs, do it in a single cut. Don’t cut it in phases, as multiple cuts are extremely demotivating.
Of course, there is also a series of other measures to take like debt financing, deferred compensation, short-time work (especially common in Germany), governmental aids, salary catchups…
2. Help your customers
It’s important to run lean and ensure the survival of your company. But quoting my friend Shaan, founder of Flockjay:
“If we retreat into full slash-and-burn without a new revenue growth plan, it’s a slow death by a thousand cuts. We’re neglecting what makes our businesses great in the first place.”
Help existing customers
Think about measures you can take on your end to help your customers master this challenging situation. Get on the phone with them, listen carefully and try to help. If there is one thing you want to avoid, it’s existing customers going out of business or churning.
Adjust marketing and sales
When reaching out to prospects, try to understand how you can help them. Shift away from the mindset of “selling”, show empathy and adjust your communication strategy. Now it’s more important than ever to thoroughly understand your prospects’ challenges and how you can provide value. And value means revenue.
Look for new opportunities
The current situation likely has caused significant shifts in your industry. You might need to adapt your product and go-to-market strategy. If demand for your product is dissipating, look for options to pivot. There are increased demands for other things right now.
Don’t forget to think about the future
The good thing is that life will go on. Every crisis had an end at some point. But how does the “new normal” look like after COVID-19? There might be structural implications on your company and your business model. You might have to decrease your burn to survive long enough, but you also need to start hiring once the market takes up again. And there will be great talent available.
3. People first & Over-communicate
Your team and their safety and health should be your top priority — ahead of any business objective. Once you’ve taken care of your team, extend your empathy to customers, suppliers, contractors and your community. Be compassionate and thoughtful about the impact your decisions might have on the people that are involved.
In a situation of high uncertainty, communication is critical. It’s important to keep the team aligned, motivated and ensure everyone focuses on the right things.
Be proactive in communicating implications for the company and make sure everyone has full transparency about the current situation. It also helps to stay calm and structured in front of the team in order to not expose them to unnecessary stress and uncertainty.
4. Take care of yourself
The current situation is intense. And it will likely continue for a while. It’s important to set parameters for yourself as leader to make sure that you stay calm and have the ability to make the right decisions. Most common measures I heard are setting fixed working hours, meditating in the morning, regular workouts, sufficient sleep, putting aside time for yourself in addition to spending time with your family.
5. Make WFH a success
The fact that everybody is working from home overnight does bring additional challenges along. Operating as fully remote team is new to most companies. Luckily, there are a lot of companies we can learn from. The best resources I found on that topic:
- Remote Guide from GitLab, the world’s largest all-remote company: https://about.gitlab.com/company/culture/all-remote/
- Zapier’s guide to work remotely: https://zapier.com/learn/remote-work/
- Best of Remote Work Resources from Close.com: https://close.com/remote-sales/remote-work-resources.html
Non-obvious advice that I found most helpful
- Establish Slack rules: Broadcast your status, structure Channels and use Threads (Slack can get messy quickly!)
- Make room for non-work related exchange: Meet for virtual lunch/coffee, establish a virtual happy hour or set up virtual gym classes and language courses. We also use Donut, a Slack app that randomly matches team members for virtual coffee meetings to foster cross-team communication.
- Embrace team members and celebrate success: We use the Slack app HeyTaco! to foster this
I hope this is helpful for some of you. If you have great resources to share or recommendations for other founders, please let me know and I’ll add them to the blog post. Let’s help each other and get through this together! The faster we adapt to the new normal the less severe the consequences for economy and society. I’m convinced that together, we’ll be able to find solutions.
