In times of great change, there are three different tracks you can find yourself on as a founder.
- Totally, completely, without a doubt, fucked
The first applies to startups with short, fixed runways and a lack of repeatable revenue. If you don’t have enough money to last 12 months and don’t have strong product-market fit, simply put, you’re fucked. In times of crisis, investors stop investing in hypotheses. If you’re trying to raise capital right now on a belief or promise that you’ll figure out your product-market fit later, may I suggest you kiss your company goodbye. And I may, in fact, be suggesting that to some of my clients this week. It’s a shitty conversation, but for some startups, there’s just no way around it anymore.
The second track, surviving, is your best worst option. If you’re looking at your balance sheets and figuring out ways to cut back dramatically and eke out the most basic existence for the next year, you’ll probably get through this. But, in putting your company (along with a year of your own time) on life support, the momentum you lose right now will be difficult to get back. The customers who are vanishing today aren’t necessarily going to be interested again in a year. Momentum is time- and place-dependent. Twelve months from now, those companies will be different and priorities will have shifted. Yes, you will still be around, but consider that survival is one step forward, two steps back.
That’s because survival is all about cost-cutting. It’s a scarcity mindset that focuses on maintaining what you have now at the expense of what you could still accomplish. If success is about growth and finding more people who have a problem you can solve, cutting costs doesn’t do anything to help you serve those people. Slashing your marketing budget, laying off half your employees — those things will not empower you to grow your business. As the saying goes, it’s impossible to cut your way to success.
So, if it’s not obvious already, the third track is where you want to be. Thriving may seem like an aspirational word right now, but it’s entirely achievable. Thriving is identifying new opportunities created by massive change and capitalizing on them. A few quick notes about thriving:
- This is not a pivot. If your startup provides banking software, do not start considering how you might manufacture ventilators.
- This is not the time to build anything with significant ramp-up time. You don’t have four months to develop a new software solution.
- Thriving is leveraging your existing product or service to serve an existing or adjacent market experiencing with a newly apparent need.
A client of mine runs Covered, a marketplace for mortgage insurance. He takes a slightly different approach than his competitors, working with mortgage companies to provide insurance options to their customers. In the last two weeks, Ross’s lead volume has dropped off a cliff — people just aren’t buying houses right now. Go figure.
He went into survival mode for a bit, and then read an article about forbearance and learned that in cases of national emergency, you can hit pause on your mortgage for 3-12 months. Ross spoke with a number of partners and learned they expect nearly 10 percent of their portfolio to request forbearance this year. One partner alone has nearly two million customers; that’s potentially 200,000 people looking to reduce their expenses in the next few months. They’d probably be interested in saving money on their mortgage insurance too. Covered can still help them do that, so they spent the weekend writing scripts and staffing their call center and will be kicking off their revised partnership strategy this week. Their lead volume will likely INCREASE.
They found another way to sell the same damn thing. That’s thriving.
To be clear, every founder right now needs to take a look at their business and figure out what they need to do to make sure they make it through the next 12 months. Maybe you don’t need that downtown office space anymore. And before you start worrying about “doing right by everyone” including your landlord, remember that if you don’t negotiate a solution today that will keep your company alive, in six months you landlord will still be stuck with an empty office.
This is Maslow’s Hierarchy of Needs shit. Survival first. Do what you can to improve cash flow, and once that’s done, figure out a way to capitalize. No one should be putting their business on hold for a year.
To do that, go back to the original vision of your company. What was your singular, primary goal, and consider how can you still achieve it, even if the world looks a little different than before. Ask yourself why the hell you’re doing any of this in the first place, and have any of those assumptions changed?
One of my clients, Wonder Years, works with the state of Colorado helping find work for people with intellectual or developmental disabilities (IDD). Steve became the true hero at my monthly CEO dinner the first time he spoke about his company, or more accurately, his clients. As he talked about finding a meaningful role for a gentleman who previously hadn’t left his room for five years, Steve welled up with emotion. His clients are getting hit just as hard with layoffs, and that impacts the very heart of Steve’s business.
So, it’s unsurprising that on our call today, the conversation quickly moved from “how can we get through this?” to “what more can we do to improve the lives of our clients?” Did we figure it all out in an hour? Hells no. But we did create a process that he’s communicating to his entire staff, charging them with focusing for the next week on simply “how can we create more meaning for our clients?” Steve’s gonna figure that shit out.
Even if you’re solving a real problem that real people pay real money for, your business might have changed drastically this week. Every budget is getting slashed and every customer is getting skittish. If your company isn’t solving a real problem, well, then you probably won’t come out on the other side of this. It might not be much consolation, but the hard truth is your company probably wouldn’t have survived even without the coronavirus. Times of change are the great crucible that forces startups to defend their existence. You might have been able to skate by for a while in good times, but even then, the market would have eventually sorted you out.
Times of great change more quickly expose that your core hypotheses are wrong, but that’s all they’re doing — exposing that your hypotheses are wrong. If that’s what you’re learning, and if you don’t have a hunger for a different but adjacent hypothesis, maybe it’s time to gracefully bow out. There’s no Valhalla in the afterlife for fighting a lost cause. Take this time to figure out what comes next.
Before taking that drastic step, though, give some serious thought to whether changing slightly (or, yeah, maybe even significantly) will move you beyond basic survival. Use this time as an opportunity to become even more rigorous and focused on your fundamental vision. You can have a business that works. You can thrive.
— Eric Marcoullier
The advice I dole out here at Obvious Startup Advice is applicable to all kinds of different startups and situations — and often mid-sized businesses and life in general. But with all that’s going on in the world today, it doesn’t feel right to discuss startup aphorisms when so many of us are dealing with the same critical coronavirus-based issues right now. So I’ve teamed up with Joseph Logan, a friend and fellow coach, to launch Resilient Founder, a weekly online group where CEOs discuss the founder’s journey, skills for leading through crisis, and ways to keep themselves strong. Joseph and I are teaming up on these blog posts each week to bring specific and timely content about how to shepherd companies through chaos. Megan is still writing them, but now she’ll be distilling information from both of us. There might be slightly less cursing. Fuck, who am I kidding.