I recently wrote an article Is Covid-19 killing startup investment? A frank assessment summarising the challenging times facing startups raising investment. It is clear there is going to be less startup investment for the foreseeable future.
But, don’t lose hope. The game is not over – it has merely changed. Cash trumps getting to “traction” right now.
Step 1: Save cash and extend runway
The first priority is to save cash and extend your startup’s runway.
- Take a long hard look at all payments. Stop all non-essential payments immediately. Then go back and look again. What else could you save?
- Negotiate payment holidays or reductions on bigger, regular payments like rent/desk space and hosting services.
Step 2: Take advantage of government initiatives and loan schemes
Where possible (and I accept that many start-ups fall between the cracks of the current schemes), take advantage of the Government initiatives provided for the self-employed and small businesses.
Yes, much of the support is offered in the form of a loan that will need to be paid back but – I’ll say it again – cash is king right now. It gives you resource to bootstrap your way through the current circumstances and that may be your survival lifeline. Provided you don’t go mad, loans can be paid back later – or re-financed if absolutely necessary.
Step 3: Focus on generating revenue in your startup
It’s time to get creative with regards to generating cash.
- Assuming your product is still relevant in the current situation, focus on acquiring and fulfilling customer orders. Those businesses that can generate cash quickly are most likely to survive the current situation.
- Are there new customer segments – perhaps created by the current circumstances – that you could market to and for whom your existing product/service solves a problem?
- Think about what resources your business has. Could you adapt these to create a new offering that would allow you to reach new customers? Think about problems customers have in this new world we are inhabiting. Could you use your existing resources in a different way to solve a problem for a new group of customers? Startups are generally very good at “pivoting” in this way as small teams and flexible skills allow you to re-deploy resources far more easily than larger organisations. Don’t be afraid to try!
Step 4: Manage cash over time
Managing cash over time – not just now at the start of this crisis – is vital. In terms of the economic fallout from Covid-19, we are in this for the (relatively) long haul. Forecast likely revenues, track progress, monitor the cash situation daily/weekly/monthly and adjust accordingly. This is not a moment to bury your head in the sand!
Step 5: Connect and share with other founders to avoid the negative impact of isolation
Whilst we must continue to follow government guidance on self-distancing and isolation, it doesn’t mean you have to go through this alone. Feeling isolated, thinking you are alone with your problems, is not just detrimental to your startup but also to your health.
Instead, connect with other founders and advisers. Share what is working for you – perhaps it might help others? Be honest with yourself and others about how you are doing. There is comfort in knowing that you are not alone when the going gets tough. Don’t be afraid to ask for help. This is a time for the start-up community to stick together and support each other.
Now more than ever, startup Founders need to connect and collaborate to support each other through difficult times and focus on the key milestones needed to ensure their startup thrives. Startup Masterminds has been introduced to do just that. Find out more here