If you’re a founder of a startup or SME, the news these days might be troubling. Even if you put aside all the health concerns, there is a major economic concern. The way the world has voluntarily shut down is unprecedented, so it can leave many people wondering what exactly to do. Especially for a startup, as you’re already new to the game.
Unfortunately, we can’t tell you exactly what to do. Nobody can – nobody can even say when this pandemic will be over. But in our 15 years of equity compensation experience, we’ve seen a lot of ups and downs. We’ve seen small companies weather the hard times, and come out the other side stronger.
So here are some ideas on how you can adjust to these uncertain times.
Re-examine your business
The world has changed radically in the past month. Travel is halted, companies are working from home, and all forms of entertainment and socializing have halted. And the longer this pandemic lasts, the greater chances are that some of these changes might become permanent.
With that in mind, it might be a good time to reexamine your business in the context of the changing world. You don’t need to panic and do a complete reversal. But maybe there are aspects of your business that you can lean into harder, even just temporarily, to offer the world something it needs right now.
You might think that now would be a bad time to raise money, but that’s not necessarily true. There are still plenty of VC funds that are looking to invest their money. Particularly in the areas that have recently exploded – work collaboration, social media, homeschooling and education, and video conferencing.
Funding might take longer and valuations might be smaller – of course, this might happen, it’s an uncertain time. But don’t dismiss fundraising out of hand. (And if you need some tips on how to fundraise remotely, check out our tips here.)
Make your cash last
This is a big one. You’re going to need to find a way to do more – or at least, the same – with less. The economy has never been shut down like this before. It could bounce right back, or it could take some time to heal. Either way, you need to reduce your burn rate and make your cash last as long as possible.
This pandemic and the economic uncertainty it is causing is only temporary. However, for a while at least, your growth might slow down drastically. Even if you have a business that is well-positioned for a crisis like this, many people who were your customers, or would have been, might suddenly find themselves without the means to be. That doesn’t have to be all bad. It’s time to focus on profitability.
Instead of trying to get as many customers as possible, focus on the ones you have already. And again, with so much changing in the world, old ideas that you had dismissed might suddenly work now. Or you might suddenly find opportunities that didn’t exist a few months ago.
For a startup, a slowdown in growth can be trouble. So, it’s more important than ever to make sure that you’re reducing your burn rate and repositioning profitability as your main priority.
With the world in a crisis, you need to act decisively. It’s important to understand what that means, however. First, you need to look at the market and your business – be objective and be realistic about where you stand. Then, decide if you need to take an action. If you do, act decisively and communicate your reasons to your team. If you don’t need to act, and you would be better served by maintaining your current trajectory, then act decisively to ensure you stay the course, and communicate your reasons to your team.
As you can see, acting decisively does not just mean making a dramatic change to your business. Sometimes, it can mean just maintaining your current course – but doing so with confidence. It means making a decision, one way or another, and following it through.
In uncertain times, you need to keep your company’s morale up. They need to know that you are doing all you can to keep the company going, and being proactive.
Many startups have faced economic turmoil and come through the other side. The last recession hit hard, but Airbnb, Square and Stripe were among the many startups to take shape in the middle of that turmoil.
Who knows what the future will bring? The only thing that we know is that the world will always need great businesses. And the businesses that adapt to the myriad changes in the world now will set themselves up for success later.
One thing you’re going to need, no matter what is an excellent cap table. Particularly if you’re going to be fundraising remotely, you need a cap table that explains itself – that is clear, dynamic and easily exportable.
If you’re interested in making the best impression possible over a video fundraiser, or just making sure you’re not making any major equity mistakes, contact Global Shares for a free demo of our cap table management software.