Since the beginning of 2020, I have written quite a few articles. My purpose has not been to create marketing content, but rather to create scale with my time by sharing key topics with my team and our startup, industry, and investor community. I also had podcasts created of many of these articles. My theory is that the ultimate scale in helping people grow is sharing knowledge and experience. My last article was February 27th. I took a break from writing because I had a very busy 3 weeks with a few keynotes, meetings in NYC, and spring break with my son.
Last week, I did not write because I was busy consuming information on the Coronavirus pandemic and tracking economic indicators. Fortunately, our firm, our incubator, and our community have been remote/virtual for three years. At work, I did not have to adapt as much.
While no two situations are exactly the same, I do take some comfort in the fact that I have experienced a few economic cycles and resulting threats. Check out this excerpt from my book. I have to remind myself that if you’re 35 years old in the year 2020, you were just getting out of college during the last recession. We can argue about “why,” but we cannot deny that we are in a recession. The question is: what does a recovery look like and how long will it take? But no one knows this answer. So the real focus should be: “what is my next best move?”
As a human: Unlike many VCs on twitter, I am not an epidemiologist, nor am I trying to study the data. I am content doing what I am told and following directions. There are zero reasons to take any unnecessary risks. I’m focusing on grounding activities like experimenting with cooking, binge-watching shows with my family, and resting. Breathe, love, and live. It’s hard not to watch the news but I have been focused on status vs. rhetoric. The last time I felt myself in this headspace was 9-11. The difference is that I feel a lot more connected to people than I did in 2001. I think this is a function of technology connecting us all, but also not having to deal with many of the racially biased concerns I was facing at that time.
I have quite a few friends who are in recovery and I learned this prayer from them:
God, give me grace to accept with serenity
the things that cannot be changed,
Courage to change the things
which should be changed,
and the Wisdom to distinguish
the one from the other.
As an entrepreneur: I’ve been a broken record. Successful entrepreneurs are equipped with the ability to understand friction vs. an immovable object. We have a very limited set of resources and we have to optimize their effectiveness. Take this time to reassess everything. Also, take this time to reassess new opportunities. Almost all great startups have actually thrived during a recession. Why? We are nimble and opportunistic. The customers that were not interested in your product may be interested now. The weekly executive meeting at your customer is not being led by the CEO, but rather the CFO. Start creating messaging that resonates with the CFO.
Post 9-11, I had a meeting with a CFO who said she would spend over $1M on my product if I would review her organizational chart and tell me who she would be able to lay off once the product was live. There are lists being created as we speak. These layoff lists are high, medium, and low scenarios. Your product should align with the decisions around these lists. I will be writing about additional strategies around this, but in the meantime read this Startup Survival Guide to Tough Times I published in January.
As a father: This too shall pass. I have two teenage sons (17 and 19). I can’t really hide much from them. I have learned the most powerful thing that I can tell them is “I don’t know, but here is what I do know.” I am preparing them for a shift in spending habits, thinking about their safety, etc. The good news is that they are a generation that would rather be on their phones with their friends than in person. As a family, we have always focused on confidence through knowledge. I am a little more focused on explaining “how things work” these days. We are already starting to talk about the new norm.
As an investor: I learned in the last recession: cash creates opportunity. The best opportunities require you to have cash on hand. The fundamentals are that while the private markets are correlated to macroeconomic drivers of the public markets (IE valuations), we invest in seed stage. Attaining the first $5M in revenue for a startup, if done correctly, is easier during these times. Additionally, your cash should be highly efficient. Like startups should be creating zero base budgets, we look at zero base valuation models. The fundamental metrics are the same; the multipliers have changed. If you do not have cash on hand, re-assess whether your current asset allocation is appropriate. You rarely gain back your investments the same way you lost them. “Selling at a loss” can be a better strategy than “buy and hold.” Creativity wins.