Starting Up in a Slow Down: Back to Basics
Last week every tech/VC blog in the world chimed in on what the economic downturn would mean for start-ups. This week started with a huge surge in the public markets followed by yesterday’s drop. As I write this post the Dow has fallen back under 9,000. I’m calling it now: yes, this is going to be a long downturn and it’s going to suck. But, it won’t mean much for smart start-ups.
If, like Charlie, you’ve been managing your business conservatively and aren’t worried, keep doing what you’re doing – it’s obviously a prudent way to run things. If you’re reading this while unpacking a shipment of Aeron chairs that just arrived at your 5,000 sq foot Soho headquarters, you should probably keep on doing what you’re doing too – your world is going to come crashing down anyway, so you might as well enjoy the ride.
For everyone else, the hysteria should serve as a reminder to keep your eye on the ball. We all need to:
Show real leadership. Employees and co-workers are scared too. Address it, discuss the company’s current position, set priorities/strategy, and execute.
Focus on revenue. Now’s the time to find a way to make money. If you’re business is advertising-based with no advertisers, come up with a different monetization strategy. Businesses that make money when no one is spending will look pretty good when the purse strings loosen again. Of course, it goes without saying that bringing in revenue facilitates other fun things too – like paying salaries, rent, and the occasional Shack Burger.
Strengthen partnerships. Your vendors, biz dev relationships, and most importantly customers are feeling the pinch with you. Find out how they’re coping. Learn from them. Most importantly (especially when it comes to customers), adapt your business accordingly.
Seize opportunity. Layoffs mean talent is hitting the streets. Scarcity encourages innovation. Customers who used to buy Big Expensive Brand A might now be interested in looking at Start-Up B instead. Take advantage of it!
Deal with funding Issues. A lot of other posts led with this, but I purposely left it for the end. Sure, raising capital is going to get harder and valuations are going to go down. That’s what happens in a downturn. Get over it and get it done. The sooner your raise the money you need the sooner you can go back to creating value. If you’re able to able to get by without raising capital, even better.
The bottom line is that things are going to change. If we’re smart about it we’ll get ahead. Most of us will have to make some tough decisions, but in the end we’ll survive. Things are always changing – those who ultimately find success are the ones who recognize what needs to be done early and do it.