The current market instability is rewriting the rules for business, and startups are facing more financial uncertainty than ever. In response, many venture capital firms are offering recommendations for how their portfolio companies can tighten their belts.
But with a plethora of advice coming at you from all sides, it can be difficult to take it all in and sort out what’s useful and what’s not for your specific business, team, and customer base.
To help you make sense of all the noise and get a clearer picture of the best path forward, the Bolton Remote editorial team scoured the internet and distilled down the advice of over 30 Venture Capital firms. Despite each firm’s approach being unique and oftentimes very specific to their portfolio companies, there were five very clear, common themes that emerged.
1. Conserve cash
This should come as no surprise: cash is king. The majority of VCs agree that a cash runway of at least 12 months is mandatory (and 18-24 months is preferable).
Reassess your goals for 2020, paying particular attention to costly projects that can be postponed. Be rational and realistic about your spending, and get ready to trade some growth for stability.
If you’re still in the process of securing capital, focus on speed and certainty rather than drawing out negotiations.
2. Hope for the best, plan for the worst
This saying appeared across almost all the executives’ advice. There’s nothing wrong with being cautiously optimistic, as long as you don’t let that optimism dictate your decision making.
Now is not the time to “wait and see” how things progress. The sooner you accept the gravity of the situation, the sooner you can determine how your business will be affected and make appropriate plans for damage control.
In the words of Pete Flint, Managing Partner at NFX, “Prepare and plan for a worst-case scenario and be delighted when you exceed it.”
When crafting your survival strategies, stress test all assumptions and create robust contingency plans for any outcome that is problematic.
3. Focus on providing value for your customers
You should always listen carefully to your customers’ feedback, but now it’s more important than ever. Acting on feedback and addressing concerns will help retain existing customers (and in some cases, grow the relationship).
Existing customers are going to be your biggest asset for the time being — do whatever you can to address their pain points and keep them happy. Especially if you’re strapped for cash, the last thing you want to have to do is lower prices or issue refunds, and the best way to prevent that is by retaining satisfied customers.
It’s also wise to focus on nurturing relationships that can be quickly poised to grow once the economy bounces back.
Consider inexpensive ways to over-deliver on expectations. Simply reaching out is a good place to start. Ask your customers how their business is doing amidst all the economic uncertainty, and offer additional support if possible — especially if your product or service can directly impact how they handle the crisis.
Especially in times of increased stress, uncertainty, and distance, people crave clarity and communication — radio silence is not a strategy.
Honesty and transparency are key at this moment. Customers want to know exactly what’s going on so they can prepare themselves. Will your service levels remain the same? Will any features of the product be adapted or affected? Will there be more flexible payment terms? If possible, answer these questions before your customers ask. Be as clear as possible, and let them know you’ll be reaching out periodically to keep them informed.
Your employees are also facing uncertainty and stress. Although you will need them to be more productive and engaged than ever, strive to communicate with empathy and transparency.
“Be calm and empathetic. Things may be bad, but staying calm and focused is important to help the organization know that there’s a plan and we will get through this. It’s good to understand and acknowledge how folks are feeling.” - Yvonne Hao, Co-Founder & Managing Director at Cove Hill Partners
5. Don’t let this crisis go to waste
There’s a silver lining of opportunity here. At a time when an oversaturated market is contracting, there will be opportunities for the best-prepared companies to expand, and certain strategic moves could potentially be even more profitable now.
Additionally, investors are still sitting on large sums of cash and are prepared to deploy once they can identify the best bets. Keep an eye out for these opportunities, even if funding is not your main focus at the moment.
Remember, many successful companies — Venmo, Airbnb, Uber, WhatsApp, and many more — were born during times of economic struggle. This black swan doesn’t have to be a death sentence for your startup.
In our current moment of unprecedented uncertainty, startups need to get creative with every dollar they spend.
Low cost, remote talent solutions are one way Bolton Remote is helping companies hit their tight budgetary goals while maintaining the high levels of customer experience needed to weather this storm.