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While the coronavirus crisis has been disruptive for business leaders around the world, entrepreneurs face a unique set of challenges.
Startup leaders must confront the difficulties of managing a nascent company culture while adapting to a radically different business environment — and ensuring they have enough financial stability to survive tough times.
We see these challenges firsthand every day at Engage, a venture capital fund and platform that invests in startups around the United States. Our corporate partners — leading enterprises like UPS — help us bring in new innovations and identify high-potential, disruptive startups.
But now many of these startups must quickly pivot and adjust to stay above water in the COVID-19 tsunami.
Dealing with crises is a familiar place for Engage’s Managing Partner Blake Patton and CFO Joelle Fox. Patton’s former life as a serial tech entrepreneur saw him leading companies through multiple financial crises, including the dot-com crash, 9/11 and the 2008 recession. And Fox worked as part of the leadership team at both a large tech company and a successful, bootstrapped startup.
As they provide advice and resources to startups in Engage’s network, Patton and Fox share below their top takeaways from past experiences and what they’re advising entrepreneurs to do now.
The most difficult obstacle for Patton as an entrepreneur during past crises was the shift from a growth mindset to one of building sustainably.
While sustainability might seem slower at first, it sets the company up for steady, continuous growth.
“Watching each of those crises, there were companies that took advantage of the deck being shuffled during those periods. Some industry leaders right now are going to have to work really hard to tread water and survive while early-stage companies can close the gap,” says Patton.
“This is a time to be heads down, prove your products and close that gap,” he adds.
Entrepreneurs often get invested, financially and mentally, in the decisions they make for their companies — team growth plans, executive hires, big marketing or sales campaigns. But in a crisis, things change, and they change fast.
Fox says leaders must aim to be swift in their decisions — but also swift to react and reorient if the plan is just not going to work out in the current environment.
“You make decisions around hiring or resources, but it’s important to set milestones against those decisions. That way, you will be prepared and less emotional about the decisions that need to be taken,” Fox explains.
Venture-backed or not, every company should act right now like a bootstrapped company. That means consistently and diligently monitoring cash flow.
“As an entrepreneur, this is something you may have wanted to delegate in the past, but it’s not something you can delegate now,” says Fox.
Entrepreneurs should gather their leadership teams around them, roll their sleeves up and start reviewing incoming and outgoing cash on a weekly or bi-weekly basis.
Identify your areas of risk, red flags or potential cash holdups. Just because it’s on a spreadsheet doesn’t mean the cash is coming in.
Customer service, always important for a startup, becomes even more important during this time. Entrepreneurs should maintain or increase regular communication with their customers, ensuring an invoice doesn’t fall by the wayside.
Equally as important as incoming revenue is outgoing expenses, or burn. Evaluate your expenses, and see how you can lower the most costly line items — and possibly eliminate the smaller or unnecessary expenses.
Be creative, says Fox. Prioritize your decisions around the data that comes out of this analysis. Be realistic, and have a best-case and worst-case scenario.
As a board member of several startups, Patton points out that a CEO has the difficult job of balancing advice from multiple sources. A company leader must weigh all that advice, decide on his or her plan of action and execute.
Leaders should also use their network as a router to connect with other advisers and experts. Now is the time to leverage those connections you have built over the years to lend an outsized advantage to your company.
It comes down to a simple tenet: Don’t be afraid to ask for help.
Core values matter more than ever in a crisis, and that is doubly true when a team cannot motivate each other in person.
A leader must constantly communicate and over-communicate to keep the team aligned around the larger mission.
“The very first thing you have to do is remind everybody of your ‘why,’” says Patton. “In hard times, you need clear alignment around your objectives and your plans, and you have to communicate, communicate, communicate!”
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