21 Point Action Plan to Corona-Proof Your Startup Dream

Calling the shutdown caused by the Coronavirus pandemic, an economic crisis is a gross understatement. It could be a crisis for the established business ecosystem, but it is the equivalent of a tsar bomba for the early-stage startup ecosystem. If all of us do not act quickly, the entire venture capital ecosystem is staring down at years of effort, getting incinerated in a matter of weeks.

When the Prime Minister, Mr. Narendra Modi, announced the Janta curfew, he talked about blackout drills and wartime curfews to a population where the majority hadn’t witnessed one. It was a reminder of a dark 15-20 period when India went through several wars with Pakistan & China. That ignited a mortal fear in me as well.

I feared that this crisis could destroy the decades of work that it took to provide confidence to young graduates to convert themselves from job seekers to job creators. We had to show years of results to convince Indian & global investors to pour money into startups via venture capital funds, angel networks, superangel syndicates, and venture debt funds. All this effort all this sacrifice, of the tens of thousands of people that make up the entrepreneurial ecosystem viz. over 39,000+ founders, 10,000+ angel investors, 500+ VC funds, several visionary politicians & government officers is on the brink of collapse.

However, real entrepreneurs are problem solvers, optimists, and overachievers. Any challenge, even something that challenges their mortal existence, will help an entrepreneur find another gear within them. As they say, even in adversity, they only see opportunity.

My team and I started to sound out Artha Venture Fund’s founders on the business impact the coronavirus pandemic was about to make a couple of weeks before lockdown. We asked our founders to create new budgets to account for the onset of nuclear winter in the fundraising world, bring their expenses down to the bare minimum, and to show patience along with courage at this time.

It has not been easy to convince the optimist in them to slow down for now and conserve energy to speed up later. Last week we put all our heads together on a zoom call to chart out an action plan for saving their dream – their startup.

I summarized the call in a 21-point action plan to save your startup memo for the founders. My team went a step further to make it into a beautiful & impactful presentation. In the spirit of joining hands during this adversity, I am sharing that presentation with you:

 

It is important to remember the immortal words of General S Patton:

515f6824aebbd71863babe1bd873d702

Together we will win the coronavirus fight in our homes, in our businesses, and our minds. Let’s roll!
Continue reading

Founder Playbook: Getting ahead of Covid-19

The aftermath of the pandemic spread of the Covid-19 virus has hit financial markets where it hurts the most – their ability to bank on the future.

These are unprecedented times as countries close their borders, the Italian government shuts down businesses, and schools, colleges, and universities are shutting their campuses and moving classes online. The disruption in business and how it will get conducted in the near term has created a tectonic shift that is rattling global markets.

When the most capitalized financial market in the world starts oscillating like a 5-year-old getting on a swing for the first time – it is time to sit-up and take notice.

Even we felt the tremors far away, i.e., in the venture capital ecosystem. Sequoia’s calling Covid-19 spread The Black Swan of 2020. This spread is dangerous, and the situation could spiral out of control – quickly.

Therefore earlier this week, Vinod and I had organized a conference call with Artha Venture Fund’s founders to address this growing situation and to work out how we could get ahead of the problem. Here is a brief synopsis of how our founders are tackling this issue (thank you, Arvind, for these notes):

  1. Do not panic but stay vigilant
    1. Keep an eye out for a demand drop in the next 3-6 months
    2. Respond to it quickly and decisively
  2. Remember that a typical downcycle in VC lasts for 18-24 months
    1. Survive this period, and you will thrive when the tide is back
  3. Investors are tightening their belts
    1. Be prepared for long delays in fundraising
    2. Drop-off in valuations
  4. Prepare fresh budgets
    1. Be conservative in revenue estimates
    2. Cut unnecessary & discretionary spends
    3. Find ways to control the burn, i.e., increase revenues or cut the costs
  5. Despite your best efforts if you envision run out of money in the next 6-9 months, then
    1. Raise an additional buffer right away and extend your runway to 15-18 months

As an optimist contrarian, an economic upheaval offers the best opportunity to gain on the competition. One must remember that people will continue to consume goods and services, but the way they consume it is going to change – temporarily.

A founder must watch the customer’s consumption patterns closely, prepare to pivot the business to serve his customer base, and capitalize – even in these adverse business scenarios.

A note: I do not attempt (in any way) to disregard the seriousness of this virus. The severest impact of this is on the part of the population that has pre-existing medical conditions. To me, it means that entrepreneurs are in the higher risk category due to entrepreneurial stress they undergo (I have written about in the past). The recent turmoil is just adding to that stress.

Therefore stay calm, stay positive, keep your ears close to the ground but keep your hands clean and off your face. 😊