10 tips for startups thriving during the pandemic
Adnan Belushi, Chief Executive, Johnson Corner
If history tells us anything, the global startup ecosystem has realised that it is in crisis mode. In the recessions of 1982, 2000, and 2008, funding for startups dried up, leaving many with running out of oxygen, and for some, bringing a pause to their growth. The economic impact of COVID-19 is unpredictable; however, it seems almost everyone believes that a global financial reset is on its way - disrupting the competitive landscape and repositioning market leadership in nearly every sector.
Recessions also show us that many great companies we admire today were built during a recession and survived the economic downturn. Great leaders were able to identify opportunities amongst all the uncertainty and persevered to come out of recession more robust than ever. Whether you are leading an idea-stage, early-stage or a scaling-stage startup, this is your time to act quickly and responsibly to survive and navigate through this crisis. Some might think that after COVID-19 is under control, the economy will get back to normal with a steep recovery curve, but the reality is; it won’t. However, by adapting and solving problems, this crisis can be turned into an opportunity for success.
With my experience of creating startups, helping others scale over the past decade, running accelerator and incubator programmes, and finding myself leading a startup today that just lost 75% of its projected growth for this fiscal year; I want to help you as I steer my own company and support startups in our startup ecosystem at Johnson Corner. I have put together a few tips to help you make quick and needed decisions.
Lead with courage and vulnerability
Now is the time to cultivate a culture in which brave work, tough conversations, and whole hearts are the expectation. Courage is how leaders behave in stressful situations, which ultimately strengthens care and connection between leaders and their teams.
Often vulnerability can be related to weakness. In many organisations, employees are rewarded for their efforts to eliminate vulnerabilities every day - removing uncertainty out of systems to mitigate risk. As a leader, if you can create an environment that includes listening, staying curious, being honest, applying believability weightage to decision making, igniting the collective courage, and keeping confidential information - it will help build trust between you and your team.
Focus on survival
Start again, create a new plan in collaboration with your team and investors, ensuring all leaders have an aligned vision of the startup’s roadmap in the next 18 months. Remember to take a hyper-realistic approach when planning. In times of crisis, things will get worse before they get better, so start with a plan to survive first. This approach should guide you to make tough decisions enabling your survival.
Focus sounds simple, but I’m every day surprised how many entrepreneurs struggle to practice it. Focus is not deciding that from today, you will be more focused. Focus is waking up to an idea that every bone in your body says - this is a genius idea, but yet, you say no to that idea so you can focus on what is essential now.
Tap into your mentor network
Our philosophy at Johnson Corner is about creating a network of businesses that can seek advice from each other daily, by working in a shared workspace or innovation space. Our platform is also digitally enabled by our purpose-built app. If your startup is based at an innovation lab or coworking space; reach out to your network for advice. Many of you will have mentors, reach out to them as well. Their advice will be invaluable to your startup.
Retain existing clients
It won’t come as a surprise if most (if not all) prospects will put a pause on making any immediate decisions and clients delaying existing projects. Now is the time to start building a strong relationship with customers by continually staying in touch and communicating your response to COVID-19. Retaining all existing customers must be a top priority as it can help boost your chances of survival.
Next, explore how your startup can diversify revenue by offering new services. Create financial scenarios and explore how this can support your financial situation if you’re expecting revenue drops (from existing customers) by 50% or 75%. If you see immediate opportunities to provide services to tackle the health crisis, it can help ease your financial pressure.
If your financial impact is not damaging to your survival and you’ve retained your customers that will resume projects after the lockdown period, then it doesn’t hurt to put your resources towards assisting the health crisis for no charge - the quicker we can contain the virus, the sooner everyone can get back to business.
Look after your employees
Keep your employees safe by complying with government regulations and making sure that your employees feel secured. Consider putting together a resolution in place that will allocate a leader or board member in case you get sick or need to be quarantined. Check-in with your employees daily/weekly and keep morale and productivity up - I’ve been doing this via Slack.
Board and investor communication
Bring transparency and comfort in your communications to your board or investors. Work with them to make decisions together. All communications regarding your startup seeking more funding are best done in advance - the timing for raising funding can be tricky when there is high uncertainty, so make sure to communicate with clarity. Clarity is kindness.
During the downturn, avoid being in a position of needing to raise capital and carrying significant unpaid liabilities such as traditional long-term leases. This can be done by reducing your expenses, introducing flexibility in supplier terms, and increasing your cash flow (by generating revenue). Stay as lean as possible to adapt to different scenarios.
Apply careful thought towards cutting a percentage of salary vs letting staff go. Do your best in leveraging government funding to cushion the impact and retain all employees. As a founder, be the first one to take a salary cut or direct your salary towards maintaining staff.
Continue with fundraising
Startups with a proven track record of strong performance will always be able to get more funding. A few investors will view this crisis as an opportunity to get great deals from startups. The challenges will lie in securing a high valuation, investors settling on strict terms, and the size of the potential investment round might be smaller.
Don’t compromise on your vision
Don't lose focus on your long-term goals, no matter how tough it gets. At this stage, many of you may be feeling that the lockdown is merely a business interruption; however, it will get tougher when economic conditions deteriorate. The long-term vision will help with deciding what short-term scenarios your team can execute - on the pathway to recovery.
Entrepreneurship is a tough gig; however, I think a global crisis is the best opportunity to test ourselves and rise to greatness.
Johnson Corner has a great network of startups who are highly collaborative and supportive of each other.