Finding silver linings

The history of sports and wars is replete with moments of inspiration. The odds are stacked up against the underdog. Out of nowhere, there is a moment of inspiration. The narrative gets altered, the game has a new direction, and an inevitable defeat morphs into an unlikely victory. I’ve previously spoken about the similarities between entrepreneurs and athletes; therefore, it is a given that such pivotal stories show-up in the lives of entrepreneurs and venture capitalists too! It happened during this month.

We shut our office on 18th March, i.e., 32 days ago. I was jittery about the future. The world was teetering at the brink of collapse, our fundraising plans got thrown off its rails, and by the time we shut down the office, moved everyone to work-from-home it wasn’t clear if our portfolio (or we) would emerge floating or underwater (pun intended).

The weekend before the shutdown, we had had a riveting offsite that was chill. But as we rapidly shut down, there was an air of discomfort, even a distrust that whether our goodbyes were temporary or final. I could see that my people were in different stages of depression as they slowly trudged out of Artha’s Coruscant. The moroseness over the collapse of the world started making inroads inside the strongly guarded walls of my work universe.

It was serendipity that while my work world started to spin out of control, I was reading a Dale Carnegie’s, How to Stop Worrying and Start Living. In chapter 6, How to crowd worry out of your mind, Dale talks about the importance of replacing worry with activity. He says:

We cannot be prepped up and enthusiastic about doing something exciting and feel dragged down by worry at the same time. One kind of emotion drives out the other.

In my context, the critical part was to discourage my people from dwelling in the bleak future and get them to start acting. I put up a schedule full of activity for the team (and myself), we took on new opportunities, and we began to collaborate multiple times a day on projects. The team initiated new projects – some relevant and some that I knew was irrelevant – but the vital objective was to keep them gainfully productive – so I approved them.

Even with our portfolio founders, we initiated plans to refocus their attention on the most relevant job at hand, i.e., survive! We worked with them to cut growth spending, shrink expenses, prepare new budgets, and focus no-cost growth opportunities. The efforts started to pay off results slowly at first but much quicker as the plans took hold.

Many founders discovered opportunities that were otherwise looked over, and a number of them started new business lines. The founders loved the proactive approach. However, there were a couple of founders that got shocked into inaction, i.e., they did not want to alter their course even if it meant taking their titanic into the glacier at full speed.

Thankfully our early warnings gave them crucial extra minutes to avoid hitting their iceberg at 22 knots, and they were saved from sinking to the bottom. It was a much-required reminder for all of us on the value of proper prior planning.

Needless to say, the first two weeks of working from home was akin to the chaos that precedes a war. I was up at 5 am (on most of the days) and slept at no earlier than midnight. But my mind was switched on 24/7, as keeping the spirits up for everyone around me became a full-time obsession.

I operated from a makeshift home office (that was previously a storeroom), it had a single window and an air conditioner that threw out hot air for the first week.  I itched to get out of the house, to the airport and fly to an unknown destination. I needed a break, but it wasn’t coming – at least any time soon.

In those initial weeks, I compared my situation to Bruce Wayne’s in The Dark Knight Rises. Bruce is thrown to the bottom of the pit with little energy to climb to the top. But Bruce finds the inner strength to conquer the well, and Bane (eventually). Comparing it to my situation, getting my team and portfolio founders moving was akin to climbing up the pit. However, ensuring that my founders and my team thrive in the face of an inevitable washout would be like conquering Bane.

Part one is done, and I am 100% confident that we are on course to overcoming our Bane.

I’ll get back to you on that.

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. 😊