Normally I would say tips. But my levels of strictness are commandments > rules > tips > tricks. So this is pretty high (Defcon 2). So on what should you do with your company in these circumstances, there are two great resources:
- Dan Rosen. He’s an old friend and an experienced angel investor. He has some great rules and the first is to have at least 12 months cash on hand (personally I think that’s the bare minimum, having 18 months is really where you should be and think about every day) and forget about raising money in this time frame. And that you should expect current revenue is going to fall, so reimagine your business focused on Day 1 problems (build ventilators, save consumers money, get deliveries).
- Sequoia Capital. They are right to call it a Black Swan and to expect it will last at least several quarters. They are the deans of venture investing and want cash for a few poor quarters (as noted above having 9 months of cash sounds pretty light). Then some good work about cutting marketing, headcount.
- Bill Gurley and Chetan Puttagunta. This is actually a great podcast and is a bit of an upper. If you execute in these times, the true entrepreneurs show up, competition falls, and there are great new markets that open up. Airbnb is always my favorite example here. People don’t like losing their house so they will rent them out and a decacorn is born.
So a summary of Rich’s rules
So here are Rich’s rules:
- Think differently. Don’t think this is business as usual. Your next board presentation should have this front and center. It will effect you and you should be ahead of this.
- Cash. Manage to a 12 and ideally 18-month cash out date. This is the most important number in your dashboard. If you are on a board, then most people don’t like to talk about it, so do your own calculation and raise an alarm. If the CEO you will do way better if you are ahead of this curve.
- Cut Early. Cutting early in marketing buys you time. You want to be on the side of making a reduced forecast. You should definitely assume that all your revenue is going to come in, so get the deals in process down as soon as possible.
- Find Demand. In every downturn, demand for something is going to skyrocket, so think about your customers, get to their Day 1 problems. For enterprises, this is going to be cost cutting. We had one startup in 2008 pivot from general mobile app development to building a mobile banking application that lowered branch costs as an example. They are out there, focus on saving people immediate money or supplying things that are immediately needed (ventilators, masks, remote work tools).
