The COVID-19 pandemic is rapidly putting startups in a novel situation.
While it could be argued that there are always companies that benefit from a crisis, most startups are facing profound challenges like drops in business activity and disruptions to supply chains.
As Sequoia put it in their now-famous Black Swan Memo
“Nobody ever regrets making fast and decisive adjustments to changing circumstances.”
Everyone on the scene has been talking about the current disruption but something is looming ahead of us that could be even more disruptive. Visibility into the future is very unclear which will, in turn, slow down all decision making and funding processes.
Certainly, the most digital and B2C focused businesses are benefiting from prevailing market changes and the expansion of consumers’ online activity. Luckily, funding capacity is still good since the VC scene, in general, has healthy pools of dry-powder in funds. CVCs and family offices may reduce their activity.
Take care of your team, talk to your people, board, and investors – rather over-communicate than under-communicate. This is also an important time to pick up the phone and call your existing customers! When times get tough new businesses are likely to suffer. Maintaining existing relationships is of the utmost importance. Get together with your customers and ensure business continuity.
Take care of your cash. Close the funding that you can, postpone investments, and review your costs. You need to have a runway that lasts until the markets calm down. Currently, it is too early to say when that will happen. In this instance, it is better to have too long of a runway as opposed to one that falls short.
Finally, many of today’s unicorns were founded or built during a recession or downturn – resource scarcity can be a source of creativity and pivoting.
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