We are all facing a completely new world today and very different from the scenarios we might have had in our heads or in our business plans a month or even just a week ago! The health of our family and loved ones seems threatened these days and in many ways somehow out of our control… But besides health risks, we are also facing larger scale economic challenges that might hit the startup world the most. Our approach is: we all need to ensure economic activity and “business as usual” as much as possible, while being aligned with safety and quarantine guidelines in the geographies, where we operate.
At Startup Wise Guys – we are moving our current accelerator programs fully online, keeping the promise of investments to the newest teams, cutting some of our operations costs and activating the whole portfolio to join hands together and help each other pass this crisis together.
Earlier today our CEO Cristobal Alonso shared this advice with our portfolio companies and after receiving such positive feedback from founders, we decided to share it wide open. Be inspired, share it with others, add your own hacks and let’s make the best out of the crisis!
Plan for the worst
Develop scenarios for “back to certain normality” by May 1st, June 1st and July 1st. Only include the revenues you are 100% you will be paid until then. And understand your trigger points to activate further cost reduction depending which scenario is going to happen and when (aka review by March 30th and April 15th if May 1st is realistic or you need to move to June or July 1st as your base scenario).
Be realistic about your cash and start cost reduction
☝️ Don’t wait any longer and tomorrow contact your landlord, explain that the office is going to be empty for at least 6 weeks and this has to be reflected on the upcoming payments. Take into account that they also have to cover their costs but keep in mind they don’t want to have an empty office in the summer because you go bankrupt.
☝️ To avoid being in a situation, where you need to fire people you’ve worked so hard to hire, I suggest reducing the salary cost already today. There are 2 ways to do it – either a full reduction or simply a delay. My suggestion would be a cut of at least 30-40%. Having done this in the past myself I have usually found out most people understand, and are supportive of this. Keep in mind people may also have less personal expenses so they can adjust.
☝️ Revise all your travel budget for March and April and likely most of May to zero. Make sure whatever tickets and similar related purchases you have had you claim the refunds or at least it is credited for future usage.
☝️ Cut all marketing budgets to a minimum for at least 2 months, if you can do 0, even better.
☝️ Any opportunity to share resources like developers with other portfolio companies or partners? Or to exchange barters between companies.
☝️ Discuss with your providers the pending payment invoices if you can delay payments by 1, 2 or 3 months. We are all on this, just deciding not to pay is not the option, but many companies may be able to allow you to pay later if you ask and negotiate. Same goes the other way. If you have pending invoices to be paid to you, reach out to them and ask them when it is realistic they are going to pay them. Try to negotiate some of the payments asap even if that means discounts on the invoices.
☝️ Cash is going to be more key than ever, if you have recurring customers paying monthly, for instance, you can try to offer them discounts to get a full year paid in advance.
Use the slow-down to fix stuff
If business slows down, might be a good time for fixing bugs, administration, accounting, all those things that we always tend to postpone. This could also be a great moment to revisit the product and some of those features you are never able to do: revisit the content of the website, adapt new languages, finetune the automatic messages and emails…
How to tackle sales when no one is buying?
👉 Assess after a couple of weeks of total chaos what can you bring online of your sales cycle. This is an opportunity to get a good demo online, a good video you did not have time to develop, bring more of your process to your CRM, etc…
👉 Reach out to your entire pipeline that is under negotiations. We assume, as a starting point, that nobody will buy anything new for 2-3 months. But it is on you to suggest a way forward, to schedule a touch point online in 2 weeks, aka keep things alive and moving even if we all understand that there is total uncertainty. People will be working not just at home, so leverage this.
👉 If you have existing customers, some of them might have some time free the next few weeks, try to engage them to have a deeper understanding of how they see your product and what can be improved, try to engage them to co-build new features together.
Fundraising and investor management
🙏 Engage your current investors right away, send them a note today or tomorrow with the measures you have taken, how you see the upcoming months for the startup on the new scenario and ask them for their engagement and advice.
🙏 If you are in the middle of a funding round and have passed the term sheet stage I will try to close it asap and if possible by any means take even additional cash even if that means sacrificing valuation and equity. Cash is king and that additional cash may be the difference between life and death as some of your revenue growth projections are going to be much slower than forecasted.
🙏 Otherwise, assume that it will be very, very difficult to start any funding discussion until the end of the summer (if possible) and likely no funding at least until Q4.
Above it all – communicate, or even better – over communicate
💪 We are sure that all of you have sent the initial email telling all employees that this is serious and most of them if not all of them have to work from home, either by choice or following government recommendations. But this is just the beginning, you need to bring new processes and emphasize communication. People have to change routines, have to get guidance.
💪 There is news all over the place that big companies are doing or planning big cuts, so fear is within all your employees. You need to address your employees on what the company can handle, what is the impact that you have forecasted, which of these measures are going to take place, etc… the worst thing you can do these days is not to communicate and let people guess what is going on. If you need to let people go, do it as fast as possible and address the ones that will remain in the company explaining what is the company’s readiness to deal with the current crisis after letting people go. Remember if you don’t do this, people would just be thinking “Am I next?”.
💪 Keep the team vibe – start putting online check-in meetings every day, put a “say hello”, or pop-up online coffee break that people can join voluntarily to see other humans and feel part of the team. Make sure to use video, not only voice calls. Find new tools to ensure this.
💪 Regarding communication, do not just communicate today urgently and forget the future. You need to make sure, at least once a week, you communicate to all your team about where you are and what is planned to do in the short term… Keep the lines open.
Let’s keep the conversation open and let’s leverage our social and business networks to help each other in this difficult time!