How to Soften the Coronavirus Blow on Your Startup

With COVID-19 rapidly changing our world, there seems so much to deal with now. We need to prioritize. As an entrepreneur, it’s first critical to take care of yourself, your family, your team and your customers. Everyone’s health, wellbeing, safety and peace of mind are most important.  

Secondly, the changing dynamic in the world will impact every organization, including your startup, for the next 12 to 18 months. As Sequoia Capital wrote in its now-famous “Black Swan” memo, “nobody ever regrets making fast and decisive adjustments to changing circumstances.” Having a plan and strategy going forward is even more important today. Here are four tips on how to protect your startup during this evolving pandemic. 

Communicate authentically with everyone

All actions should lead to increased credibility and fundability. This is a great time, and an important time, to pick up the phone and call your existing customers. When times get rough, new business can quickly go down. So existing relationships matter. It is important to see how you can get together with your customers and ensure business continuity, consider new offerings or other ways you can assist and support them. Your investors and bank should be a close second phone call. They are your allies and will be there to support you in any way they can, with bridge financing or short-term cash injections.

Stop the burn rate

You will need an aggressive cash plan immediately. Do not delay. Find every means possible to reduce costs now. Find every possible way to lengthen your runway. Communication with employees is critical and needs to demonstrate how important they are while recognizing if the business doesn’t survive it doesn’t help anyone. Consider everyone taking a pay cut to the bare essentials and, if necessary, offer layoffs so employees can collect government benefits; you can offer full employment again when things turn around. As well, talk to your suppliers and partners to see if they can carry some of your costs over the long term, especially if they are big players in their industry. Remember, you are their customer (back to tip No. 1).

Find funding options

New revenue will be very limited unless you already serve—or your business can pivot to serve—specific COVID-19 needs of people or other businesses. Traditional angel and VC funding will slow to a trickle for the foreseeable future. This is the time to consider funding and short-term deals that normally you would never consider. Stay on top of provincial and federal government support programs offered to small businesses and apply to them all.  Monitor all the news feeds since right now large private organizations are providing a lot of support, from Facebook and Google to all the big banks. Foundations and high net-worth individuals are also offering unprecedented funding opportunities. Do what is needed to increase the cash coming in.  

Opportunity

Think outside the box when considering how your business could pivot or add something that supports the COVID-19 needs of people, the health-care system and other organizations. Don’t forget to explore innovative or even radical ways to secure and deliver value to new and old customers. Do this in a caring and compassionate way—not to make tons of money, but to keep some positive cash flow coming in, so it is a win-win situation.  

Today isn’t the time to think about hockey-stick growth or when you will reach your entrepreneurial goals. It’s about using your strengths to help. More than ever, the world will need entrepreneurs to be resilient and solve problems for a brighter future. When we start to recover, every industry will be impacted and have to innovate, and every economy will need to rebuild with startups and small businesses leading the way. Today, your goal as a startup is to stay alive and be flexible. As with all downturns in the past, there will be great opportunity when we return to the new normal.   

Shari Hughson is director of the Master of Management Innovation and Entrepreneurship program at Smith School of Business.