Equity Driven Acceleration Strategy
Startups: Accelerate Now To Survive
Startups face a myriad of challenges for survival at the best of times. But given the global lockdown we all face right now, acceleration seems counter-intuitive — when in fact it’s essential for founders to get ahead now — so they can be the first in line to get funding.
When the risk of COVID-19 spreading subsides in a few months time, and investors get back to doing business, there will be fierce competition between startups for funding.
Add to this the fact that the VC firms, angel investors, and seed funds which will be actively looking for investment opportunities — will be spoiled for choice. And it’s the startups that have the most active users, a scalable business model, paying customers, an advanced product, and a proven product market fit that will get their attention.
So the challenge is clear, startups need to accelerate. But without access to immediate capital, how can founders get the development, design, and marketing talent they need to get in pole position?
There might be a viable solution — one that can benefit founders, investors, and the legions of tech talent who find themselves locked down and out of work right now.
Review & Adapt
Just a few short months ago many startups looking for capital were spoilt for choice — with many organisations at various stages of development having a choice between different funding options.
That has been turned on its head in a matter of weeks. Many startups will now have to review and adapt their business model, positioning, and funding strategy to survive.
This means evaluating the current situation and setting actionable objectives and targets — as well as taking a long hard look at performance metrics — such as product market fit and the number of paying users — and understanding how to accelerate development and growth.
But getting in the right position means having resources. However, with funds depleting rapidly, they need to think beyond the bank and consider different ways to attract the talent needed to implement a new alternative strategy.
And what is it all startups have to offer? Equity.
An Equity-Driven Acceleration Strategy
Offering sweat equity in exchange for skills is a strategy I’ve used with one of my startups.
Due to the current pandemic, many people have had projects postponed or even cancelled altogether. With more time on their hands than ever before, talented people are still keen to work and they’re looking for new opportunities — which startups can offer.
While paid jobs are in short supply, working for equity could be an interesting alternative for many. At least on a part-time basis. It’s also an implied possibility that when cash is available they’ll be first in line for a paying job. This gives new employees scope on the further rewards their work could have.
Get Ready For Post-Lockdown Pitching
New talented team members — especially if they’re devoted to the cause enough to work for equity — can ultimately help attract the capital a startup needs.
While it’s likely that when investment does become available, it will be for smaller amounts (or at lower valuations) initially. However, startups that have accelerated through the current downturn will certainly pique investors’ interest.
While everyone’s trying to get by right now, the promise of a future payoff is still attractive. Ultimately, people respond to confidence in an idea. I’ve found many talented and experienced people who are interested in providing their skills in return for equity — from designers who have worked for Apple to developers who have worked for Sage; even writers who have written for The Huffington Post.
To accelerate effectively, what founders need to do is keep driving their own vision of success. Attracting new talent — especially those working for equity — gives founders additional resources at a critical time. And furthermore it’s an ideal proving ground for when it’s time to pitch to investors.
