Flavia Richardson On How To Stay Afloat In Times Of Economic Downturn

Imagine this journey:

Born in Bucharest, Romania, relocated to London for 14 years, the last 8 years working in investing…

And last year she joined the Silicon Valley Bank as a SVP of Early Stage Investment.

That’s Flavia’s story.

Flavia Richardson helps early stage startups grow, and that’s especially important in these hard times.

So we sat down with her to pick her brain and get some idea of how to navigate the seemingly horror situation we’re in.

What you’re reading is a retelling of that chat.

What is your driving force Flavia?

Before we delve into the wisdom Flavia shared with us…

It’s important to understand what’s the engine behind her growth.

And in her one words…

It’s curiosity.

“My driving force is curiosity, trying to find all the answers, and getting better everyday at what I do” — Flavia Richardson

And she describes it like a drug.

She started in this whole investment business without knowing a lot about how it worked.

And it hooked her.

Meeting investors…

Learning new things…

Realizing you have even more questions afterwards…

It’s thrilling.

And it kept her going.

More importantly, it made her realize that as an entrepreneur, you always have a lot of questions and new things to discover.

And it’s not always about the answer.

Sometimes, the journey is just as important as the destination.

We wanted to share this with you because we think it’s an important part of how investors think.

And now for the actionable stuff…

Early Stage Startups

Flavia chose to focus on early stage startups for similar reasons.

It’s an amazing field because you always meet founders and talented people that embarked on a journey to turn their crazy idea into a mainstream reality.

That means challenges.

A lot of them.

So it’s a more thrilling aspect to startups.

For late stage startups, it’s just about keeping the ball rolling. Organizations are not as agile.

But considering the amount of challenges…

That begs a question.

How do you identify a good startup at an early stage?

Short answer: here’s never one telltale, that’s what the game is all about.

But if you do your due diligence on the founder, the team, and the product, you should get a grip on what are the startup’s chances of survival.

Sure, if the founder is new, it’s hard to analyze his capabilities.

But the first thing Flavia (and a considerable amount of investors) looks at is the team, how they perform, and their history.

That’s not to say numbers don’t matter.

You should also check their numbers (but they can be misleading… more about that in a bit) and the market they’re in.

Speaking of…

Early Stage Companies in Romania

Flavia’s in a special situation.

Being born in Bucharest, but working for an American company from London, she knows the taste and outlook of a lot of markets.

And if you’re in Romania trying to fundraise…

You have around 30 or so funds, so you don’t have unlimited pots of money.

“In Romania, you don’t have unlimited funds or trusts to reach out to. Remember that when you value your company, contact investors, or just do your best to grow.” — Flavia Richardson

Understand that, especially if you’re working on deep-tech or hard to develop technology.

And start thinking globally. Both for funding, and for how you want to grow. Do that exercise in the early stages of your business and your future self will thank you for it.

Oh and, don’t forget to mingle, network, and reach out to investors.

Which might be a bit harder to do now…

So let’s get into that.

The CoVid Crisis and Early Stage Startups

There’s a ton of uncertainty, so let’s cover the basics — we had a few very tough first months.

The government did step in certain places, and that helped.

So we’re going to be sheltered, at least in some markets, because governments recognized the impact of early stage startups in solving problems and overcoming important societal challenges.

But it’s not all rosey.

Flavia thinks that some companies will shut down, and a lot of people will lose their jobs.

But there will also be a lot of opportunities for entrepreneurs that can stay ahead of the trends and adapt quickly.

(see that agile characteristic of early stage in action?)

How is London approaching this crisis?

UK companies are privileged because the state got involved a lot, and capital is still moving around.

And for future funds, Flavia thinks they’ll grow, even if we had a slow Spring.

They also have The Future Fund — a programme where the government will match any investment early stage startups get.

Plus there is still plenty of capital moving around in the UK. Over 50 billion pounds, and that’s the money new funds (created in the last 18 months) manage.

But that’s not to say startups can just be passive and wait for funds.

If you’re a business owner, you need to stay on top of the situation.

How To Avoid Economic Downturn

Before we get into it, remember that periods of economic downturn are always around. Our economy works in cycles, so a crisis eventually gets to us, whether we want it or not.

But you should also remember…

That this is a new situation, and nobody knows exactly what the solution is.

But Flavia studied the matter through a lot, and she shared her process for how early stage startups can stay afloat.

If that’s you, definitely read on…

First, you should default to data as much as you can. Well-made studies about what’s going on are in short demand, so analyze your turnover, ROI, and other financial metrics as much as you can.

And make decisions based on that.

Second, focus on your clients as much as you can. Talk to them, understand their struggles, and then be ready to change drastically to adapt to what people need.

Third, attract the right talent and focus on people. These hard times can only be overcome through collaboration and trust, so listen to that talent you have around as much as you can.

Fourth, analyze your pathway. If you were planning to get funded in the next 12 months, understand that that may not be as achievable anymore, so plan for the long term.

You can still get capital, but you should understand that it might take a bit longer.

Lastly, remember that everything we know or expect is being challenged right now.

So be agile, and adapt as much as you can.

This is what Flavia told us, and we think it’s important startup wisdom.

But that posed an even interesting question — How do investors analyze startups, especially during this period of economic downturn?

Analyzing Startups

Of course, they still check the regular metrics and how they change over time, like the value of contracts, income, and the like.

But investors also pose commercial clients.

What clients do you have?

What market do you work in?

How do you expect it to change?

It’s important to not only focus on the numbers.

And Flavia has a lot of examples to back this up.

For example, she was working with a company that signed a 2 million pounds contract in their first few months.

Looks good on paper, but they weren’t able to onboard any other client in the coming year.

And that means they might not survive.

But the reverse is true as well.

They worked with a company that was 3 millions in debt after borrowing over 6 months.

Which definitely looks bad on paper.

But if you took a closer look, you realized they charge their clients a monthly subscription fee, so in the coming 12 months they were about to make that money back, and a lot more on top.

That’s how investors think.

At least in part.

But how should you adapt?

What questions do investors ask before they choose to pledge money to your cause?

Sure, they’ll have commercial questions:

What clients do you have?

What countries do you want to expand to?

And why?

You need to be ready for those questions.

But you should also be prepared for product questions.

What features are you going to build?

Flavia’s advice?

Make sure you always have something to show investors. A good, well-rehearsed demo.

How To Reverse Engineer A Startup Funding Pathway

Our interview then turned into something interesting.

We had Flavia do an imagination exercise: What if she had a business right now?

What would she focus on?

First, she said she’d clearly settle on a country (or countries) she wants to be active in.

Then, she’d create a pathway to move from country to country in her expansion.

But not without researching all the possible funds in each country. She wouldn’t raise money right away, she’d work on a product first.

But she’d keep funding possibilities a click away.

How can you do that?

• Look for international funds
• Check Angel Lists
• Connect with as many people as you can
• Use LinkedIn heavily
• Map all the contacts you have

And then, you can afford to approach the situation very strategically:

“You know what, I just want the funds focused on insurances”

Lastly, don’t forget to check the regulations in all the countries you want to expand to.

Flavia says this is something overlooked by founders.

Investors expect you to be covered legally before you expand.

So research the legal situation of your market in the countries you plan to expand to.

Lastly…

Don’t be discouraged.

We know these aren’t the best of times.

But you can make it.

IF you work smart and stay on top of what’s happening.

Which is not always easy for…

Female Founders And What They Face

Flavia thinks it’s crucial we acknowledge there are some problems, for women and minorities too, in the way they can access opportunities.

And it all starts in the way we’re educated, with women being pushed away from more technical fields.

Unfortunately, entrepreneurship is pretty similar: we don’t focus on helping women access the programmes we have.

Indirectly, a single mother of three will have a harder time accessing the same accelerators and programmes men do.

We should do more to support companies with women co-founders.

But Flavia also thinks we made some headway in this area. There are programmes helping women all across the West.

So if we stay this course, we should help create a more inclusive space for everyone.

To End This On A Brighter Note

A lot of people have it hard now.

Businesses are shutting down or at least closing branches all across the globe.

The travel industry took a huge hit.

And a lot of industries followed.

But hope is not lost.

We’ll say it again: hope is not lost.

If we work together, default to helping our customers and each other…

We can identify the opportunities that can take us out of this uncharted economic space.

Do you agree?