Advice for Startups to Weather the COVID-19 Crisis

For most of our readers, this will likely be the first economic crisis that you have experienced. This video (~10 minutes) outlines 8 tips that Drive Capital, a venture capital firm, is sharing with its portfolio startup companies to weather the COVID-19 crisis.  This is great information for aspiring entrepreneurs, investors, and for anyone interested in business. The tips are focused on managing financial risk in the midst of an economic crisis.

There is also some good information to incorporate into answering interview questions that you might be asked related to your thoughts on the impact of the current coronavirus crisis on business.    

Advice for Startups

  1. Over Communicate: Over communicate with team, investors, and board. Everyone needs to see you running at the crisis and dealing with it.

  2. Invest in Systems for Your Company to be Successful: There is nothing more frustrating than trying to find solutions to a crisis without being able to talk to one another. Invest in systems such as Zoom or Google Hangouts to make sure everyone is connected.

  3. Stress Test Your Company: Assume 1/3 of recurring revenue and see if you can survive for the next 18 months (longest closing of capital markets historically). If you cannot, over communicate with your team, investors, and board, and options will start to come up.

  4. Pull Down All Available Debt Now: If you have access to a line of credit, pull it down now as we are at the front end of a crisis when such facilities are still available.

  5. “Run to the Roar”: If you have crucial counterparties, proactively get in front of them to get in front of any potential problems.

  6. Share the Bad News: Share all the bad news with your employees, board, and lenders to build trust.

  7. Pause All Hiring: The economic impact will negatively affect all companies. Assume the worst.

  8. Do Not Hesitate: Migrate to a war-time mentality. Aim for good, not excellent, decisions as good enough choices will get you through the crisis.

#interview #VC

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