From the Founders — These Are the Most Useful Things Investors Have Done for Founders in Our Startup Program
Being a founder is hard work at the best of times, never mind in the midst of a global pandemic. A recent report by Startup Genome found that 41% of startups they surveyed had 3 months or less in terms of cash runway left, 74% have had to terminate full-time employees, and 74% have seen their revenues decline since the start of the outbreak. It’s safe to say that times are tough and will continue to be tough, especially for industries hardest-hit by the global economic lockdown (such as travel and events companies).
When founders have tough decisions to make, need advice or a sounding-board for new ideas, they often turn to their investors — and the founders on our Startup Program are no exception. We surveyed a number of startups, and asked what are the most useful things their investors have done to help them weather the COVID-19 storm.
A few key themes emerged from the responses. The most helpful things investors have done include:
- Connecting founders with other startups in the portfolio, as well as potential customers, investors and industry experts.
- Assisting with restructuring, cost cutting and planning.
- Being transparent and accessible.
Let’s unpack those.
#1: Connecting founders with other startups in the portfolio, as well as potential customers, investors, and industry experts.
Connecting with other founders who are making similar tough decisions provides a great opportunity for founders to share new insights, tactics and processes, and act as advisors and mentors to one another.
As Brian Platz (Co-CEO, Fluree) says, “[Our investors] have connected us with other portfolio CEOs making similar decisions so we can discuss respective approaches and board guidance — this has by far been the most helpful thing.” (a sentiment echoed by Michael Lee,Co-Founder & CEO, Evolve Energy). Having a group of people with different life experiences and thought processes, and who can empathise with your situation and provide a subjective perspective is hugely valuable at the best of times, nevermind during a period of such uncertainty.
Providing additional capital, or making introductions to potential investors is another key thing that VCs can & are doing to help startups survive.
“Humn’s investors have worked with me to shape up a new investment round that makes sense to everyone on both sides of the table and then built the list of strategic new investors we should be targeting” (Mark Musson — CEO, Humn.ai).
Fundraising is a hugely time consuming and exhausting process for founders, so any way of alleviating some of the workload to allow them to focus on firefighting and keeping their company afloat is undeniably valuable. In a world where the VC ecosystem gives a lot of weight to warm introductions, a quick email from one VC to another can save a huge amount of a founders’ time.
Introductions to potential new customers, or industry experts who can provide deep strategic insights (and possibly more introductions) was another recurring theme in the responses we received.
#2. Assisting with restructuring, cost-cutting, and planning.
Tough times call for tough decisions and the thought of having to cut-costs, restructure and potentially let valuable, much-loved team members go is a bitter pill for any founder to swallow.
An investor with industry experience and a portfolio going through a similarly tough time will be able to take a more cut-throat approach compared to a founder facing the harsh realities of a COVID-19 world.
“We have a great set of investors and we have lots of heart to heart conversations around the team, product, industry, and current economic climate and how to best weather it.” (Sce Pike — CEO, IOTAS)
#3. Being transparent and accessible.
Founders are facing a huge amount of uncertainty and receive huge amounts of new, often conflicting or unclear information on a daily basis. Having a set of investors who can act as a “sounding board” for founders not only helps them to make sense of this new information but also may help strengthen the trust and relationship between investors and founders.
Sean Hinton CEO & Founder of SkyHive, has found this to be the case — “Just being a sounding board during this time has been incredibly helpful and has brought us closer together.”
And of course, for those founders who may not have as much access to their investors, a CEO of an AI-powered fintech company reminds us how help can take many different forms: “…our investors have been very hands-off in their relationship with us. They want reports on our roadmaps, our results and our milestones, and of course they’re making relevant connections whenever possible, which is great. There’s also very little micromanagement which is a huge plus, but of course, distance also means that our relationship feels more transactional. […] It seems to work for us, but I’m not sure that everyone would thrive in that kind of “sink or swim” environment.”
Investors have been incredibly supportive to the founders on our Startup Program during this crisis! Simple actions, such as making introductions, giving advice and generally being accessible to founders appear to be the most useful and valued things an investor can do to help their portfolio. See what other investors are doing during the pandemic here.
For any VCs reading this who would like to offer a wider community for their founders to engage with, please get in touch as we’d love to invite them to our Startup Program.
For any founders reading this who would like more support, guidance, and mentorship, both from industry experts and fellow entrepreneurs, take a look at our Startup Grind Membership. Or, read our partner piece to this article: Are VCs Really “Open for Business”? and If So — What Does That Look Like In Reality?
