The coronavirus pandemic is broadly affecting businesses globally, but it is affecting startups particularly hard. In this article, I have gathered some key advice to startups from leading venture capitalists and others connected to the venture industry.
1. Cash Runway Is Paramount
“We suggest you question every assumption about your business, including [cash runway]. Do you really have as much runway as you think? Could you withstand a few poor quarters if the economy sputters? Have you made contingency plans? Where could you trim expenses without fundamentally hurting the business?”
2. There Is a New Reality
“Startups hoping to get a round done imminently, praying this goes away soon and thinking the world will be the same need to realize there is a new reality. At Arbor Ventures, we are working closely with our companies to reduce their burn immediately, adjust customer expectations, and identify new opportunities that will emerge. This is a time to stop and think about what is next and what significant opportunities will exist. Founders who can escape the noise and capitalize on the needs of a new world order will build great companies.”
—Melissa Guzy, Arbor Ventures
3. There Will Be Opportunities to Shine
“Your company may be uniquely positioned to step up during this challenging time. There is so much that is still unknown, so be vigilant about assessing the market as circumstances unfold. Run hard at opportunities that may emerge and be ready to adapt your product to meet evolving demands. Use these openings to not only drive incremental growth, but to reinforce your brand and reputation.”
—Ellen Herlacher, LRVHealth
4. Keep Your Friends Close
“In an environment like this, it’s critical to maintain strong relationships with your key customers, partners, and employees. Have a thoughtful plan of engagement for each of these key stakeholder groups. It’s never more important than in times of crisis for your partners to feel like you have their back and are there to support them. Investing in this now creatively and with authentic engagement and energy will pay enormous dividends in the future.”
—Phil Dur, PeakSpan Capital
5. Over-Communicate
“In times like this, people don’t like to be in the dark. Leaders must rise to the challenge and proper communications is the first lever. Keep your employees informed. Keep your customers in the know. Keep your vendors and your partners abreast of what your company is contemplating. If you can be counted on to deliver consistent, recurring information flow, others can act and respond accordingly. Show empathy, acknowledge you don’t have all the answers, and share what you individually will be doing. The mode of the communications, written or verbal, doesn’t matter.”
—Michael Yang, OMERS Ventures
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6. Be Swift and Judicious
“We are doubling down on portfolio support, with the assumption of a recession as the base case. Be swift and judicious with any opportunity to extend burn at the moment. Hiring cuts should be considered very carefully; if they are needed, a proactive approach is ideal and will feel uncomfortable. Let’s validate and be realistic with our monetization strategies and business model with regard to 2Q expectations. Expect delays in fundraising and lower valuations. Be mindful of how the downturn may create silver linings. We remain clear-eyed, risk aware, yet optimistic.”