The truth is: no one has all the answers these days because this is an unprecedented time of change and uncertainty. To get your bearings and learn how to approach this time, read this post from Steve Blank, serial entrepreneur, investor, founder of the Lean Launch method, and Columbia’s Senior Fellow for Entrepreneurship.
After that, here are helpful resources we’ve gathered for you to lean on as you lean into this phase of your business, broken down by questions we have been hearing. There are also a few resources for grants and relief at the end.
Q: I am overwhelmed and don’t even know where to begin.
If you’re not sure where to start, here’s a resource from Brand Foundry VC that breaks down some common things to think about and how to tackle them, like: Operational Guidance; Going to Market and Still Winning Customers; and Managing Payroll and Layoffs.
Q: I’m worried about making payroll, runway, and other costs mounting – how do I manage my expenses in this uncertain time?
Here are how many startups are cutting their costs in the short term:
- Halt all unnecessary spending
- Effect a hiring freeze
- Pause marketing with PPC and SEO
- Pause contract work
- Pause and defer all SAAS products that will not be used
- Of course, any event and conference spend is already paused.
Cash management is key these days. Here are some tips on making those tough decisions (and the changes need to start today):
- Incentivize upfront payments from customers
- Seek out deferred costs (e.g. making the decision to go with $5k/mo rent with 6 months free, versus agreeing to $4k/mo rent)
- Pay commissions when your company is paid, not upfront
- Redo your financial model to reflect this new situation
- Temporarily reduce the perks you are offering
For a deeper dive, check out this article on How to Cut Expenses from Permanent Equity.
Q: I was in the middle of fundraising – what do I do now?
Here are some key takeaways, with original sources linked below:
- Make your cash last. Imagine that the global economy is in a recession and it will be another 6-12 months before the virus abates. Do you have enough money to last until mid-2021 before fundraising if you need to? It is always possible the economy will escape unscathed, but it is best to prepare for this not being the case.
- Expect slowing growth. Customers may cancel deals last minute or take longer to close. For many startups, sales will slow. If you were growing 3X a year, you may be down to 1.5X or 2X. Can you front load contracts and payments, or find other ways to make up for lost customers in terms of locking in cash?
- Can you “uniquely win” right now? Alternatively, is your business uniquely suited to this environment? Can you buy a competitor, accelerate growth, or make the situation workable?
- If you need to, raise money. You may want to do it as a flat round or small bump to close money rapidly. Are there people who wanted in on the last round you can include now? The markets may recover quickly. Alternatively, valuations may be on a slide for the next 6 months. It is often better to have cash than to be overly optimistic about how quickly things will recover.
For an austere“first principles approach”, this is a great time to revisit Paul Graham’s iconic post, which helps startups consider their profitability and chances of survival. He encourages founders to consider whether they are, in his words, “default dead or default alive” and what to do accordingly. Additionally, the advice above was sourced from the following:
- Leading Internet entrepreneur and investor Fabrice Grinda analyzes the current situation and gives advice on raising more than you need and controlling your burn here.
- Angular Ventures gives advice on keeping your workers safe, adjusting forecasts, and refocusing the marketing mix here. and figuring out if you’re uniquely positioned to win in this time here.
- Serial entrepreneur Elad Gil covers being realistic about your new work from home workforce and whether you’re uniquely positioned to win in this climate here.
- Venture capitalist Semil Shah put together this helpful post on Fundraising in a Pandemic World
Q: I don’t want to put my foot in my mouth – how do I phrase things in my outreach to customers? Newsletters, social media, and the like?
Again, there are no one-size-fits-all best practices here, but it is more important than ever to be authentic and to be human.
Understand that while everyone feels the uncertainty of these times, their reactions might vary: what is energizing and comforting to one person may not be the case for another. But, if you truly understand your customer and believe in what you are offering, take a moment to think deeply about how services or products fit into this climate and speak from there.
Q: Where should I keep track of resources at Columbia?
Our calendar stays up to date with virtual events, and here are a few more things to be aware of in this time:
The Tamer Center for Social Enterprise at Columbia Business School has this page of resources for nonprofits/social enterprises.
Applications for the Columbia Startup Lab, where alumni entrepreneurs receive subsidized rent, tailored programming, and a supportive community, are open until May 1.
For information on possible grants or other support, please check out:
- The U.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19).
- Shea Moisture launched a $1 Million Fund to support entrepreneurs of color. Applications open today (4/8) and have a quick turnaround.
- Spanx Red Backpack fund is a $5 Million fund targeting women entrepreneurs. Applications opened 4/6.
- Facebook is offering $100 Million in cash grants and ad credits for up to 30,000 small businesses. More information can be found here.
- Verizon has donated $2.5 million to the national nonprofit Local Initiatives Support Corporation (LISC). LISC is targeting grants up to $10,000 to entrepreneurs of color and women-owned businesses. To register for the mid-April round of funding, click here.
- Hello Alice is offering $10,000 grants to help small business owners. For more information about those grants and other small business resources, click here
- Microsoft is providing six months of Office 365 tools for free to enable remote collaboration, file sharing and video conferencing. For more information, click here
- Tory Burch Foundation has a useful list of resources (for both funding and advice) for small businesses that can be found here.