08 Apr Insights for Startups on Surviving Covid-19
It’s no secret that the Coronavirus pandemic is creating significant economic impact in central Indiana, or that the effects are just beginning. Between the impending, historic stimulus package and the sharp increase in Indiana’s unemployment claims is deep uncertainty, the middle ground where many small businesses and startups are trying to find solid footing. A majority of startups have already shared insights with consumers and investors about their steps to protect themselves and efforts to stay open. But what do you need to share to reassure your investors? And could the communication during this time make you more attractive to new investment in the long term? For startups trying to survive and thrive during this crisis, I share the following insights.
1. CAPITAL: Talk About Managing Existing Resources
First, it’s important to accept the reality that fundraising is going to look different for a while. This doesn’t mean you won’t be able to raise funds, but it does mean that investors may be incentivized differently and could be looking for better terms thanks to a shift in the balance of leverage and the markets. A top question on the mind of every current investor is if your startup will be able to sustain operations with the cash you have on hand? Whether you have already taken steps to increase capital efficiency, or are considering those steps now, communicating about your actions is the most basic necessity during this time to protect the future of your startup.
2. PRODUCT: Involve Current Investors in Your Need to Pivot
Existing investors have partnered with you because they believe in both your product and your management team, but the current state of the world may have destroyed a segment of your market – or even the need for your product in some drastic cases. As you rally your team around the new normal and the potentially major changes to your product roadmap, it’s vital to keep a clear path of communication to your investors so they are not surprised to learn of a major diversion from the original plan in a quarterly update several months down the road. Their rolodex and expertise can be vitally important to you, so take advantage of it.
3. COMMUNICATION: Routine Messages Keep Big Announcements Palatable
Directly related to the points noted previously, routine communications, even weekly in these times of crisis, provide opportunities to strengthen ties with your investors and allows them an opportunity to provide feedback and support to you where applicable. All founders are being forced to make decisions related to staff, real estate, development, and forecasting – all of which could have serious downstream ramifications if handled incorrectly. It’s important to get all the valuable advice you can get before doing anything drastic.
4. RELATIONSHIPS: This is a Marathon, Not a Sprint
Both short-term and long-term success are built on strong relationships. Your ability to sustain existing relationships and curate new ones in the face of adversity will not be done overnight but is built on a track record of clear, open and efficient communication channels. Potential future partners and investors will use this as an opportunity to witness the strength of your product, leadership, and your team with every day that passes, so be sure to allow your authenticity to shine through.
Summing up, through clear communication and mutual support for one another, the Indiana startup ecosystem will not only survive, it will thrive. The decisions you make today will impact your organization now and into the future, so be thoughtful about the downstream ramifications and seek advice as you consider those very important changes that are sure to come. The changes we have seen in the past month are not the end of the road, so know that the planning you are doing today will help prepare you to handle new challenges as they arise.
Associate VP, IU Ventures
Executive Director, IU Angel Network