Just about everyone who’s running a startup right now is in some stage of concern about the future (dare we say freaking out? Breath….). With COVID-19 changing work styles and forcing program cancellations, a down economy with decreased spending and budget lifts, cashflow management is super important.
These 15 founders talked to us about how they’ve weathered the last few weeks of WFH, decreased consumer spending, and a general down economy.
Managing expenses and people
The biggest change our company is going through after having had such exponential growth is cutting down on any extra expense. We’re freezing our hiring and making sure that roles and responsibilities are being clearly and efficiently assigned across our team. Sales and marketing is the most important focus right now as we have to get creative on how we generate more leads while remaining empathetic to the situation. We’re also ensuring that we’re giving our existing customers all the love and care in the world because our existing customers are really critical at this time.
– Suuchi Ramesh, CEO & Founder, Suuchi Inc.
Consider asking your team to take a pay cut for the duration of the crisis – 10%, 20%, 30% depending upon your situation. If you have a vision that is compelling to your team, they will largely stick with you and you’ve just extended your runway. Of course, you’ve already cut your own pay by 50% before you ask! Remember that investors won’t “backpay” so make sure you’re clear that this is “sharing the pain” in order to ensure survival. Of course this is all more compelling if you have a good stock options program.
Note that if you get into a company threatening crisis, DON’T lay anyone off!!!! Instead, increase the discount until you have some runway. Some people may leave, but you may be surprised at the number who stay, particularly if you are making progress at raising capital or selling the company. I’ve seen a cut for an entire software company down to $10/hour work and keep the team intact!
– Nicole Toomey Davis, President, CEO & Co-Founder of Enclavix
My concern right now is near-term and long-term uncertainty. We came into the month executing a plan to hire and grow—then the world shifted—and a path to growth in this climate isn’t clear anymore.
We’re putting plans in place to cut non-essential expenses, explore revenue opportunities that won’t scale, and work to simulate our company running at 75% or even 50% of where we are today. Everyone is experiencing so much uncertainly and hardship on a day-to-day basis. We must ensure our team can breathe a bit easier knowing that we can make it for 12 months without growth if forced.
– Darren Buckner, CEO & Co-Founder of Workfrom
We’re reviewing the products we use, and going through each of our SaaS subscriptions & making sure we pay for the services which we need and looking at subscriptions due up for renewal and making a business case for whether we need to renew subscriptions.
We’re only spending money on marketing we know works, and reducing spend on experimental marketing initiatives that we’d otherwise have an appetite to absorb any losses of ROI. We’ve reduced marketing budgets (ie. Apple advert) and are spending the minimum to ensure we maintain a presence without over-investing.
Our founders cut their salaries to 50% to ensure cashflow, which is a temporary measure with immediate impact. And we’re not replacing staff who are leaving. We’ve had 2 team members move on for personal reasons. Instead of backfilling their roles, we’re restructuring to do more with fewer people: Offering more Part-Time & contract opportunities to fill roles which were previously Full-Time.
We were also able to move offices from a central downtown location to the outer downtown fringes to give us better value for money and save a third of our rent (rent is one of our biggest monthly expenses).
– Christy Laurence, Founder & CEO of Plann
We’re obviously watching cash flow carefully right now as the world has become so unpredictable. We are investing in “must haves” (keeping our operation running seamlessly) and trying to reserve some money for unforeseen things that might come up along the way.
Must haves are things that are building our loyal customer base and nudging up retention numbers. To that end, we’re looking at creating unique experiences, like offering virtual, in-home hair consultations and creating “self-care kits” and focusing more on digital, and a bit less on brick and mortar placement right now.
Retention is less expensive than acquisition, and given the uncertainty we’re experiencing in DTC it felt prudent to direct our efforts toward loyalty and community building, offering more value which is easier to scale digitally.
– Lynn Power, CEO of MASAMI
We immediately took a hard look at our expenses, and trimmed everything that we felt was unnecessary. We started with the obvious items like office supply delivery, cable television in the office, swag for near term events, and so on, and then went about things more thoughtfully, auditing our software package licenses, and putting a freeze on PTO requests (obviously not including leave for sickness!).
– Aliza Seeber, Co-Founder & Managing Director of Spark Orange
As a bootstrapped startup, we have always been careful about managing cash flow and kept expenses to a minimum. The COVID-19 outbreak and the economic uncertainty that resulted from it have caused us to reassess expenses and think of additional revenue streams that are related to our core business. Specifically, we’ve frozen any additional spending and decided to only keep essential expenses such as website and email hosting, employee salaries and a mailing address at our co-working space.
We expect that the next few months will not be an easy time to attract venture capital, and have shifted our user acquisition strategy to prioritize expansion into additional user groups. This will increase the value-add our product provides for paying customers and would allow us to become profitable sooner. With a possible recession looming closely, we think that the best way for startups to survive going forward is a clear focus on profitability and building a sustainable business.
– Leia Rusava, Co-Founder of EllisX
Last month I told everyone that all unnecessary costs were being cut. No one would be getting paid for a few months, myself included. We have an abundence of AWS credit so server costs are negligible. The main goal being to make out going expenses be as limited as possible.
I cut staffs costs by asking people to work for free or for a super reduced rate. Instead of working out of a coworking space everyone worked in their own spaces and worked remotely together. The dev team is based in India anyway so it was a comfortable position.
No one was happy, admittedly, but I was very clear about my plans for the next three to six months. When you run a startup it’s so important to be very transparent and to work with people who understand your plans and trust you.
Being a startup everyone working with me has understood thankfully, so this Corona thing isn’t effecting the business too badly just yet.
– Marie Farmer, Founder of Mini Mealtimes
We’ve embraced that we need to do more with less. We raised venture capital investment this fall, so I’m grateful that we’re in a better position than many other startups. However, we know that raising a Series B will be more difficult under worse economic conditions, so there is more pressure to grow exponentially or become profitable or both.
Last week, my co-founder and I sat down and strictly prioritized our product and marketing efforts. With fewer resources, we have to be more focused and rigorous about doing the most important things first. As a result of those conversations, I (sadly) made the decision to let go of one junior employee who I felt needed more investment than we could afford to give. We also reorganized management to give our strongest and most senior engineers more time doing individual technical work rather than management or operational responsibilities.
In the last two weeks, we’ve also designed a remote work policy for the first time to set expectations and granted our employees an extra $200 to set up a comfortable, ergonomic home workstation. The first sentence of the policy is “Remote work does not mean no work” just to re-emphasize the urgency and importance of personal responsibility. We’re adjusting to “shelter in place” with remote lunch chats and happy hours so that the team can stay connected..
On Friday of last week, as the public health crisis escalated here in San Francisco, I had an all-hands to announce these changes and re-emphasize the importance of each person stepping up to be proactive.
– Julia Enthoven, Founder and CEO of Kapwing
We have always run lean – mostly because we had to – but we now look at each expense through the lens of “will this help us in 30-60-90-180-360 days?” The smaller the number, the higher it is on the list – for now.
– Carolyn Peer, CEO & Co-Founder of Humaxa
Ask for vendors to #payitforward
We scored a large partnership with a Fortune 500 company in late February with net-60 terms. I emailed their purchasing department about the #payitforward initiative and they’re now working to see if they can accelerate payment timing. Of course it helps that we were already launching virtual services to help new parents and the pandemic is increasing demand dramatically!
For reference, here’s what I sent:
“Thank you. In the event you haven’t yet seen the NYT article asking large companies to help small businesses by paying more quickly during the pandemic, I’m sharing this here. If there is anything we can do to expedite this it would make an enormous difference in our company.”
“We’ve launched #payitforward, an initiative to ask large companies with flexible balance sheets to immediately pay their small business vendors, rather than waiting the usual 30 to 45 days to pay their accounts. This will help these small vendors, who support countless thousands of jobs, stay afloat for the next 30 days and pay their employees as best they can.”
– Jen Saxton, CEO & Founder of Tot Squad
Consider asking all of your vendors for the “Pandemic Discount” – particularly if you are a regular, loyal customer. Customer switching your business from a big, impersonal business to a smaller, more agile, highly motivated, local business willing to offer that discount. That includes your landlord, who is probably overcharging you compared to what new tenants will be willing to pay. This includes your attorney and your accountant!
– Nicole Toomey Davis, President, CEO & Co-Founder of Enclavix
Share resources and create a buying network
“Some women in our community have started FB groups so they can all buy and sell directly from each other as a response to keeping money flowing at this time. Our response at Mothership is to get our free business toolkit with budget and other relevant templates and guides out to them ASAP to help them manage their finances and prepare for the future.”
We were in the middle of a pretty abysmal fundraising campaign for our Pre-Seed round, which would have helped us get the business toolkit to our community and prepare for opening. But right now our main focus is to be able to get this tool out.”
– Nanna Soenya, CEO of Mothership Group
Set yourself up for the future
As underrepresented founders, we have to look for alternative paths to seed capital, so we were on our path to an equity crowdfunding campaign and to activate the angels we’ve built relationships with over the past two years.
With COVID-19, we’ve had to put that on pause and just focus on growth for who-knows-when the investment markets come back, assuming that ultimately growth and strong customer satisfaction will make a fundraise more compelling. We want to be part of the solution for making people feel better in these weird times.
We’ve invested in backstock to last us the next six months or so, just in case. We don’t have the space for it, but we’re gonna find the space for it, ya know? We’ll store it in my bedroom if we have to.
We’re lucky enough that when we sell something at Gardenio we make money, and turns out when people stay home and feel food insecure, and growing food actually does better!
But right now nobody who works for Gardenio gets paid, and with rougher labor markets, it’s harder to pick up contract work to stay afloat. Honestly, it’s a little bit of a “grow and figure the rest out later” mentality.
But not doubling down in this moment is an even greater risk for our long term goals.
This reflects a lot of what we’ve heard when we’ve talked with angels and VCs.
– Roman Gonzalez, Founder & CEO of Gardenia
A lot of businesses are scared, and they should be. Because they’re scared, they’re questioning their marketing and advertising spend. Don’t be one of those companies. Now is the best time EVER to double down your dollars so that you can capture more market share. It may sound a bit callous, but we saw the same thing happen in 2008/2009, and the smarter companies that survived and thrived turned a challenging time into an opportunity to grow. It will be good for you long-term and is the right thing to do to keep the economy going.
– Laurel Mintz, CEO of Elevate My Brand
Consider offering your customers the “Pandemic Discount” to cement goodwill. Be candid that these are tough times, offer a discount, and ask what else your company can do to help your customers. You will likely be surprised that very few companies are doing this for their customers. Put yourself in that special category of “extraordinary” vendor.
– Nicole Toomey Davis, President, CEO & Co-Founder of Enclavix
We fully believe that times like these must be used as an opportunity to build a stronger business, and immediately identified strategic sales and marketing initiatives where we would invest, particularly across digital mediums where we can provide immediate value in areas where we feel as though we are thought leaders/solution experts. For example, we have deep experience in strategy & process consulting, implementing, developing and building automation in the SaaS, insurance, and manufacturing industries, and have an amazing staff augmentation model that provides high-value skill sets to our clients who need additional resources on their Salesforce support teams…so we’re planning webinars that might help manufacturers better navigate remote work via the Salesforce platform, and at the same time talk to them about how we can help with managed services.
Additionally, we feel like there’s no better time to invest in the creation of additional revenue streams, so we’ve performed an audit of all of the codified IP we’ve developed, and identified several high-value applications that our engineering team can bring to market for distribution on the AppExchange (a platform for Salesforce add-ons).
– Aliza Seeber, Co-Founder & Managing Director of Spark Orange
Thoughts around fundraising
The one thing that I haven’t changed is that I’m still talking with potential investors. It’s easy to assume that because we’re going through a tough time there’s less interest out there. I think most investors are interested in playing the long game, which means there’s a lot of interest out there. I’m remaining optimistic and taking on more calls with every call that comes my way, and believe that as long as you’re looking at the long-term and surround yourself with the best people — people who are committed and understand the vision — it helps identify the type of team and investors you want around you in the long haul.
Just remember that cash is king. If you’re trying to raise a round and have a certain amount of money or valuation in mind, my advice is to raise what you can because valuation is less important during times like these. Just bringing in money and shoring up cash reserves is more critical at this point.
– Suuchi Ramesh, CEO & Founder, Suuchi Inc.
Just plain pivot
We were creating an immersive travel guide for Barcelona. Of course, tourism in Barcelona is suffering greatly from the lockdown and travel restrictions. Given the current situation, as well as the negative outlook for the travel industry as a whole, I have decided to pivot.
We are still using the same technology, but now we’re aiming at providing users with virtual guided tours. Our mission is to give people the ability to explore destinations, learn new things about culture and history in spite of the travel restrictions and health concerns. We are responding to the market.
As founders, we must be able to make decisions quickly if we want to survive crisis. The worst thing one could do now, is hope that things will return to normal in a few weeks, or months. I doubt the world will ever look the same again.
– Anastasia Pash, CEO & Founder, Globetrotter VR
