First, we already know that COVID-19, or more familiarly the coronavirus, has already caused death, suffering and sorrow in a mass scale. We also know that it will still get much worse, before it gets better. My thoughts and prayers are with those that have suffered and who have their loved ones suffering from this pandemic.
For us that work in the tech and start-up world, one of the main purposes of life is around our current start-up and its success. We at Evli Growth Partners are entrepreneurs by heart. Nobody obviously knows what lays in front of us in the future, but here is our advice for you during these unprecedented times.
1. Take care of your people
There is only one thing that ultimately matters for startups and that is their people. Always start with yourself, the last thing any organisation needs is to have its management dysfunctional. It is also about showing example: if you keep on shaking hands, meeting outsiders and planning for business trips, you can’t get others to follow strict restrictions (except that lean and open organisation will do smart things regardless of dumb management).
Secondly, make sure that your top management, other founders and other C-level are on this with you. Form a sub-group for corona-related issues. Prepare for the staff corona infection(s). Divide all of your teams in two and make sure that they do not meet physically anymore.
And thirdly, be open and share as much information as possible with all your staff. They are all worried and open transparency is the key. During crisis (and corona is certainly one) you must lead from the front. And since you can’t physically meet, you must be in front of your staff in all of your social and digital channels.
2. Back to the core
Unless you are selling corona test kits, this is not a time to open new markets or add features to your offering. You must revert to your core business as soon as possible. There are several reasons for this. First, your current customers will need support and service because of new business conditions. Make your sales team call your existing customers one by one. Show love and care towards the ones that have trusted you.
Second, any new customer is busy with their own crisis management and new sales will just be more difficult than before (check your corona-CAC).
Third, by concentrating to your core, you will have a much better control over your business, there are less unknowns around it and you can control your costs better.
3. PPS (people, product and sales) and check your pulse on product-market fit
In any given board meeting, we at Evli Growth Partners would always like to discuss only about three things: people, product and sales. That is our core. In times of trouble we find these areas as vital as ever.
On product development, this will be a tricky time. If the pandemic passes fairly quickly, you can actually catch-up on your product development road map due to fewer enquires from new sales but, at the same time, one must prepare for much lower future sales and, therefore, less money for the investments as well. Make sure that your product people keep their eyes on the ball.
Is your product up to it, has the market changed underneath and do you (still) have a fit?
Like you know, your only task as an entrepreneur is to find a product-market fit and, once found it, scale it. Now it is the time to have a look at your product-market fit once again. Is your product up to it, has the market changed underneath and do you (still) have a fit? A well-timed pivot during market turbulence is a risky move, but hey, we are in a risky business. Operationally, here is a great piece of advice.
4. Not the survival of the fittest
We have entered to an uncharted territory with the corona outbreak. What we can remember from the last severe downturns (from 1980’s onwards — and yes, we were born a long time ago), the next 18 months or so are not going to be a survival of the fittest but a survival of the last one standing. So, prepare yourselves in all different fronts to protect your cash flow, payment terms and your freedom to operate. First and foremost, make sure that the best talent will stay with you. Consider staff cuts and new option programs at the same time.
From venture capital funding point of view, remember that if Nasdaq is down 20 %, the valuation of your non-listed start-up is down even more. From the European perspective, I am estimating much less foreign (US and Chinese) capital to European companies and a fierce battle for the scarce local growth funding. Luckily, there is a lot of dry powder in VC funds in Europe, but they all must also make an additional reservation for their existing investments. As a result, there will be a record low number of new investors in startup funding rounds during Q2 and Q3 of 2020.
5. Finally, call your mother today, I am sure she would like it.