If you are running a startup in today’s post-virus world order you also need two pockets so that you too can reach into one or the other, according to your needs.
While I am certainly no rabbinical scholar; I’ve always been moved by the story told of Rabbi Simcha Bunam of Pzhysha who apparently once said to his students that “Everyone must have two pockets, so that he can reach into the one or the other, according to his needs. In his right pocket are to be the words: ‘For my sake was the world created,’ and in his left: ‘I am but dust and ashes.’
In your right pocket are the words: ‘My startup will never raise another dime and the world is coming to an end’, and in your left: ‘this is the greatest business opportunity ever for my startup to gain market share and build a meaningful and enduring business’.
One of the few benefits of getting older is hopefully obtaining a little experience and perhaps even some wisdom through the years. As a startup survivor who got through both the dot-com crash in 2000 and the great recession after the financial collapse in 2007; I’d like to share a few thoughts for founders as well as some resources. As a little background, at Simplexity — our entire purpose is to help founders. We do this through Simplexity Venture Studio (our venture fund and studio) and through Simplexity Services (our services company that handles the finance, accounting, and administrative matters) for many of the top early-stage venture-backed companies. (www.simplexity.co)
Right Pocket: the world is coming to an end
Really know your current financial situation and your obligations. Don’t kid yourself. You need to immediately look honestly at your entire financial position. My partners and I have backed a company called Knowbility (https://knowbility.org/) and they’ve been working hard to create a new financial insights platform for both founders and their investors (now in an invite-only beta) and they will allow you to use the product for free if you reach out via email to info(at)knowbility(dot)co. This tool will allow you and your investors to see what’s really been happening with your business and also scenario plan collaboratively.
Communicate; clearly and often. VC’s worlds have also changed; almost all of their energies have shifted to triaging their portfolio companies instead of looking at new opportunities. You need to demonstrate that you understand the new world order; that you are taking prudent and decisive actions to preserve cash and extend runway. They say that parents are only as happy as their least happy child; well this applies to VC’s and their portfolios. This is time to demonstrate your leadership ability and to keep their confidence that you are adapting to survival mode. Once you formulate a plan; don’t be bashful to ask for bridge money or a round extension. Don’t be proud on valuation; be kind and even overly-generous to your angel and venture investors. Be proactive in offering them a deal; warrants can be your friend right now. Anyone who steps up with a checkbook to support your business should be rewarded and appreciated.
You’d be amazed by what you can renegotiate; but again; you need to first really understand all of your agreements, contracts and obligations. Our team at Simplexity Services are pros on accounting and they are happy to speak with you for a free talk to make sure you know what to do or even help you do it as a virtual partner. They’ve also partnered with a law firm that is strong on contracts and another great labor attorney. Don’t assume you have to live with your current reality; use every legal and practical tool available to you to reduce your fixed cost structure and get creative. If you’d like an introduction to our Services team; just send me an email to cliff(at)simplexity(dot)co.
Left Pocket: this is the greatest business opportunity ever for your startup
The most important thing I think I’ve learned in startups is the difference between hiring patriots and mercenaries. Patriots are authentically devoted to the startup’s mission, product, customers and the team and mercenaries are really only driven by money. This is a time for patriots. As you are forced to weigh profoundly difficult choices in staff reductions; make sure you balance skills, compensation, and the ability to work with the remaining team members — and only keep patriots.
But if you are running a startup; it’s also time for you to be at your best. Physical and emotional health are paramount; even Presidents have taken vacations in wartime. We are all limited by what we normally do to manage stress and keep healthy; find new ways quickly to take care of yourself or you won’t be able to effectively take care of your company.
This is a time to deeply interrogate the value that your product and company honestly provides to customers. If it doesn’t provide real value, joy or ROI — then pivot, hibernate or even return capital so that you have goodwill with investors for a new day and a new vision.
However, if your product is strongly suited to today’s new world-order — go for it! You can now suddenly hire amazing people far easier and for less compensation. You can advertise more effectively and with less money than anytime you’ve ever witnessed. After the virus crisis abates; the business press will be searching for new companies that made an impact. Act and position yourself by imagining the story that you’ll want to be told. Then make that story come to fruition.
Be bold and creative for new funding sources. Even though Morgan Stanley had long since been a startup– I urge you to find your inner John Mack (the former CEO of Morgan Stanley) who saved his firm in the financial crisis by getting a check for over $8 billion from Mitsubishi when everyone thought the Japanese couldn’t and wouldn’t move quickly. The point is not that you need $8 billion, but don’t be bashful going to customers and channel partners for creative funding. This is a time to call on every business relationship and goodwill you’ve ever earned in your life.
On behalf of my partners and colleagues at Simplexity, we hope you and your families and teams will stay healthy during this crisis.
We are here to help.
A Premium Coworking Community built by entrepreneurs for entrepreneurs who want to reach higher
Connect with Us on Social Media!
www.downtownworks.com
info@downtownworks.com
619.535.967