COVID-19 Toolkit for Founders
Resources and advice collected by our team at Blackbird to help founders navigate COVID-19.
As the global situation with COVID-19 has evolved, we have been working closely with our founder community on how to best approach the inevitable changes to business operations as we know them.
We thought it might be helpful to share some of the learning from our founders to help founders plan for the coming months.
So what should founders do and how will it impact business-as-usual?
1. Keep employees safe by limiting the spread
As the situation develops in Australia, New Zealand and the rest of the world, many businesses will go fully remote to protect their employees. We have recently taken our operations remote at Blackbird and have shared our COVID-19 policy as an open-source document. Some of our portfolio companies have adopted this policy and have now implemented working from home (WFH).
Hardware and bio-startups
For hardware and bio-startups, taking all operations remote often isn’t an option. In this situation, some of our founders are now rotating one person at a time in the lab, while all other staff work from home. Baraja’s co-founder and CTO Cibby Pulikkaseril published their guide, which other hardware startups might find helpful.
We encourage startups wherever possible to #stopthespread.
2. Get up to speed with remote working best practice
First of all, make sure your remote working policy is as inclusive as possible. Consider your team’s ability to work from home. Not everybody can easily work from home easily, either because they don’t have a quiet or private place to work, good enough wifi or mobile connection, small children, or other inhibitors to effectively carry out their particular role.
Check in with each staff member to ensure they have the minimum required to be productive. Consider your company culture and how you’ll shape and maintain it while operations are remote.
Here are some useful links to get you started:
- Online WFH Workshops by CultureFirst
- Utilise Tools to Shape Culture
- Guide to Remote Work from GitLab
- Forbes Guide to WFH
- Plan Your Week from Startmate CEO
- Advice for Rapidly Adopting Remote Work
Team communication: At Blackbird and Startmate we have implemented a company-wide 15-minute daily All Hands each morning via Zoom. We will continue our regular 1:1s and daily stand-ups on Slack and are testing new tools such as Tandem. Below is a list of tools we are using to keep communication lines open:
Geekbot on Slack: For daily standups or do workflow reminders
Tandem: For watercooler chat (free for a couple of months)
Zoom: All Hands, meetings and 1:1s
Trello: Shared to-do lists
Security: OneDotZero has created some helpful general advice for businesses taking their operations remote and working from home securely. Please note this is a generic guide only and needs to be tailored for your business needs.
4. Manage the potential downturn
Sales projections: Hartley Pike, CEO of Sitemate, a Startmate alumni suggests trying Futrli, to quickly run multiple, complex sets of scenarios and assess impact on cash flow. It plugs directly into Xero, allowing for adjustments on variables for each scenario and produces PDF reports that can be shared with the board, investors, and your leadership team.
Fundraising: The first thing each founder should do is know their cash burn and runway in months. Consider curbing expenses to extend your runway. Pear VC has compiled a great list of suggestions.
If you have less than six months of runway, you should consider whether you need to fundraise (either from existing investors, or new investors). It is going to be harder to raise right now than it was three months ago, or even three weeks ago. In the last week alone we have seen US investors pull term sheets and say no to meeting any new companies.
Although it will be harder to raise, US$46 billion in US venture capital and $1.3B in Australian venture capital was raised in 2019 and 2018 respectively, with more funds announced since then. These funds need to deploy capital regardless of the macro environment. The difference will likely be investing pace -- VCs may try to make a fund last for 2-3 years which would normally be invested over 1.5-2 years, so they aren’t themselves trying to fundraise in a recession.
If we are indeed at the beginning of a longer downturn, there will be much less ‘dry powder’ in the system 12-18 months’ from now. Therefore, if you raise now, try to raise 2 years+ runway rather than the standard 18 months. Expect valuations to be lower. Colin Keeley’s research on the ‘09 recession suggests a next round valuation step-up of 1.35x from the last round valuation.
Against this backdrop, you give yourself more options if you can reduce your burn and get to break-even. If you can get to break even, you may out-survive your less frugal competitors and come out the other side even stronger than before.
If you have greater than six months but less than six months runway, model a Plan A/B/C scenario specific to your business and consider what your strategies will be to counteract that. Have clear, objective measures for when you would pull the trigger on Plan B. The goal is not to panic and frighten yourself into paralysis. Rather, it is to develop a prepared mind about your options while you still have the luxury of time. Start your fundraising processes sooner rather than later.
5. Map out the scenarios
You may find it helpful to think about the possible scenarios along the dimensions of:
- Personnel/team risk – do you have team members in COVID-19 affected areas who are unable to work? Are they infected or caring for affected people? Are they unable to do their jobs effectively right now?
- Supply chain risk - can you not manufacture or get access to supplies that the company needs to be productive?
- Customer/revenue risk - are potential customers just unwilling to engage with you right now? Are supply chains affecting your ability to make sales? Will customers cancel subscriptions or reduce seats? Are budgets in the departments to which you sell getting reduced or are you dependent on a champion whose job is at risk?
These are all scary questions. However, right now many founders are observing that, as Einstein said, “in the middle of difficulty lies opportunity.” For example, companies that previously required plane travel to make a sale are moving to online demos and lower-touch (aka cheaper) forms of selling. Social distancing policies have made many industries wake up to the need to be cloud-first and mobile-first and are buying technology to enable that. Technologies that make us less dependent on, or augment human labour, like robotics and AI will also likely receive a boost.
6. Double-down on what matters
You have an opportunity to cut the fat from your operations and concentrate on what matters. Spend your cash flow judiciously, focus on building the foundations for a durable business. Many successful businesses were created in bear markets.
“Overall it's an opportunity to focus, double down on the one thing you are 10x better at than anyone else and your customers would be irrational not to buy from you,” says Startmate CEO, Michael Batko.
If you are at the beginning of your journey as a founder, don’t stop now. Take advantage of the Australian Governments Coronavirus support. Boosting Cash flow for Employers incentive provides $25,000 back to small and medium-sized businesses, with a minimum payment of $2,000 for eligible businesses. The Boosting Female Founders initiative provides grants for up to $480K.