Zen and the Art of Building a Startup During a Pandemic
My wife and I arrived in San Francisco in December 2013 in a packed car, and I was excited to begin work at a nine-person startup based in a Potrero Hill condo. We moved from our home state of Wisconsin where it was exactly one hundred degrees colder (no kidding!) than Northern California. From there it was two years of accelerated learning, as the company scaled up from humble beginnings to hundreds of employees building exciting technology for big-name clients.
During that journey I was fortunate to meet and work with some really amazing people, including my co-founder Niklas. Fast-forward to 2020 and the two of us are back in the early phases of a new venture, only this time we are in the driver’s seat — and the learning curve is even more intense than the first time around!
When we started this new company, it would have been impossible to predict a catastrophe like the current coronavirus epidemic. Still, as an early stage startup we feel lucky that we are relatively insulated in the short term. We recently raised some money and have not yet scaled up headcount or accrued other significant expenses. So we’re in the process of “making lemonade” — recognizing our privilege and position while doing our absolute best to build something great.
Meanwhile, the world is upside-down. We are in the middle of a disaster affecting billions. People around the world are doing their best to care for the sick, turn the tide of the infection rate, and make sure that everyone has basic services like food, medicine and shelter.
Social distancing measures are helping to turn the tide of infections, but they are taking a toll on the economy. Recent employment statistics are dire, despite steps that congress has taken to help prevent further erosion of jobs. As if that isn’t enough, it looks like things might get worse before they get better.
With all of that in mind, it’s also important that as many businesses as possible survive the downturn, so that demand for employment doesn’t lag too far behind the initial recovery. This will help shorten the average unemployment duration and protect against housing and food insecurity.
Our goal remains the same: build products people love.
In the world as it is today, although we have adapted some of our strategy, the goal is consistent. We are working to build things people love by:
- Learning fast from early adopters
- Executing efficiently
Early-stage ventures are structured to endure negative operating cash flow.
In fact, it’s a fundamental part of how new startups work. Lose money for a short time while investing in customer and product development, then scale up and make money for a long time.
R&D takes priority
This joint health and economic crisis brings challenges of many shapes and sizes, but also new openings. As Scott Farquhar of Atlassian outlined recently [2] at the Morgan Stanley NextGen Software CEO Summit, during the initial stages of a downturn, the return on investment for each dollar spent on research and development can be much better than dollars spent on sales and marketing. This makes intuitive sense. As consumers and businesses reduce their spending, there is naturally more competition for the remaining share of wallet.
This is a great opportunity to explore exactly what problems are most important in our customers’ minds, and therefore what goods and services are absolutely essential.
We are just beginning to understand how the macroeconomic sands will shift. Sadly, companies in need of financing soon are in a bind. Not only has availability decreased, the cost of capital for both debt and equity financing have dramatically increased. The silver lining in all of this is that business owners, staff, investors and customers are now even more closely aligned around the core value exchanges and fundamental sustainability of the business.
Companies that emerge from these trying times with delighted customers and solid financials will be in the best position to continue growing through the economic recovery to follow.
We are focused on the fundamentals: managing our cash flow, talking to customers, and creating compelling products that provide significant value.
Like everyone else, we have to endure the storm. At the same time we are curious and optimistic about what the coming years will bring. Now that companies have been forced to embrace remote work — will it stick? How might the way we engage in activities like travel, live music, sports and meals out be changed forever? What other established industry players will become vulnerable to disruption by new entrants? Is handshaking over?
There is no way to know for sure, but the future is created one step at a time. And that’s why our next post will talk about how we take those steps without getting lost.
How is your company responding to today’s operating environment? Let us know in the comments!
[1] Photo credit: San Francisco Photographer Cassandra Jens of @pitaya_photography
[2] A Covid-19 CEO Checklist and Other Lessons From Morgan Stanley’s Virtual Software CEO Summit. Jessica E. Lessin. The Information. 4 April 2020.
