Our world has fundamentally changed, and the future of business has changed with it. As entrepreneurs, our biggest concerns from eight weeks ago, such as “How do I manage my dilution?”, have been replaced with “How do I survive the next month?”
Then, capital was freely available and we had a good handle on customer behaviour. Now, investors have sidelined themselves to take care of their companies and customers have done a complete 180. We no longer operate in the old state of normal, and there’s little point in looking back.
If you’re a tech startup founder, this might well be your first economic crisis – even your first market cycle change. Stress levels are high and difficult decisions need to be made every day.
What is an entrepreneur to do? Where to focus efforts? What questions should be asked? To survive or even thrive in the new normal, entrepreneurs must be asking themselves five questions:
1) What is my legacy approach and how is it hindering me?
Think back to when you started your company. Was it you and your cofounder working around a kitchen table? That’s when your legacy approach was first formed. How you made decisions together, how you defined your priorities, how you structured your company. Then you grew from a team of four to eight to 16. Your organizational structure was solidified, and your early culture was born. As you went from your series A round to your B round, you gave investors different rights and you established different classes of shares. All of this defined how decisions would be made and who had a seat at the table.
Now is the time to reassess this legacy approach and consider how it might be hindering you. Does it take a week to get a decision from your board when it should only take a day? Is your reporting structure causing needless frustration? Do some stakeholders have too much say in your day-to-day? Are you handcuffed by a certain process? All of these issues can bog you down and get in the way of decision-making.
Time is in short supply. It should be measured in days, not weeks or months. All your time should be spent on anticipating the future, preserving optionality and extending your runway, not on dealing with old issues that don’t serve the new normal.
2) How can I increase my speed and agility?
Entrepreneurs that come out of this crisis intact will take time now to increase their speed and agility.
In the absence of a crystal ball, the best thing they can do is maximize their ability to turn on a dime. Swiftness and flexibility will also help you maximize your cash runway and give you optionality – two critical factors that will determine who survives and thrives.
Don’t forget, many great iconic companies were born in times of crisis – General Motors, General Electric, Google, Apple, Microsoft. These companies weren’t created during market highs, but times of extreme stress. They knew that by staying speedy and nimble, they’d be able to go where the puck was headed.
3) What stays and what goes?
COVID-19 is already forcing society to question what’s essential and what’s not. It’s shown us our dirty habits and wastefulness. We’re wondering whether norms developed decades ago, like maintaining a sprawling office instead of allowing employees to work from home, are still relevant.
Now is the time to adopt a lifeboat strategy: Take what you need and leave what you don’t. As we paddle to safety, we have a unique opportunity to jettison what was bogging us down – to clean up our balance sheets, look at our options, extend our runways, reassess our table stakes.
4) How should I use the time now to think through the next wave of innovation?
Governments have acted quickly to help Canadian companies extend their cash runways. They’ve given entrepreneurs time to think through next moves. This is a big opportunity for Canada’s tech sector: Although we punch above our weight class in discovery and innovation, we’re well below where we could be in terms of commercialization.
Difficult as is it, this crisis will lead us into a new economy founded on innovation. This will create enormous opportunities in emerging industries, such as telemedicine, patient-centred digital health, AR/VR and digital experiences, online learning and education, business continuity technology and virtual event management.
Looking to the future, we should expect that there will be more crises of this scale. Another pandemic is possible, even likely. The impacts of climate change will continue to be felt. Our world is changing rapidly and now is the time to think big and innovate fast.
5) Who can I turn to for good advice?
For the past 11 years, we’ve been living in a bull market cycle – for many entrepreneurs, the only cycle they’ve experienced. The new normal can be intimidating.
Now is the time to find the right advisors. Someone who can be a true sounding board and co-pilot. The best advisors may not default to existing board members since investors can sometimes make suboptimal decisions in order to protect their slice of the pie. Entrepreneurs should look for people who have gone through difficult market cycles before, people who understand how not to cling to the bubble. Seek out support that you think will move your company in the right direction.
In conclusion, now is the time to take action. Not tomorrow — today. If you don’t make hard decisions now, your company might become a victim to another – one that’s faster or more agile. Right now, clinging to the past is your biggest boat anchor. It may be hard to see, but the future is your biggest opportunity. You can do this. And where you can’t, the right people can help you through it.