If you’re looking for predictions on recovery or when the best time to resume fundraising will be, I’m afraid I don’t have an answer for you. At this point, it’s difficult to predict how the market will evolve in the next six months. What I do know, however, is that times of crisis bring out the strengths in better entrepreneurs, individuals and companies.
Here are five suggestions I have for all founders during these trying times.
Look In before Looking Out
If you’re tempted to look to investors or shareholders for help at the first sign of trouble, stop. Look inwards - you have to be able to help yourself first. That should be your first order.
Internally, what have you done to better manage your finances? Once you have consolidated your practices, you can then speak from a position of strength to outside investors and demonstrate strength to potential investors. Building on this basis of strength, you are more likely to negotiate better on external financing, if it’s needed.
Investors will be looking closely to see how you handle and navigate a crisis like this. If you’re always looking out, there’s less likelihood that external help will step in.
Rationalize Your Operations
When the crisis hit first in China, we spent about two weeks with CEOs from our portfolio companies. We took a read on where they were in terms of cash flow, financing, and balance sheets. We had to make conservative assumptions in their cash-in and cash-out, because we knew revenue was going to come down dramatically. Not only that, there’s also a good chance that the burn rate, even if you don’t do anything, will continue to remain the same, or go up.
Another thing we did with our portfolio companies was scenario planning. We did a one-month, two-month, and potentially six-month scenario planning based on the impact of the virus. This was to plan ahead for cost and operation optimization, which meant cutting unnecessary costs and headcount.
Ultimately, this crisis is an opportune time to rationalize your operations: what are the essentials you can and cannot do without? Be mindful of what you’re cutting as well. You should be retaining your core assets or your core competencies.
— Jixun Foo, Managing Partner, GGV Capital
Ultimately, this crisis is an opportune time to rationalize your operations: what are the essentials you can and cannot do without? Be mindful of what you’re cutting as well. You should be retaining your core assets or your core competencies.
Expect A New ‘Normal’
We see a behavioural shift, not just in consumers but also in enterprises. You will see a complementary mix of online and offline practices in business behaviours in a post-virus world.
Don’t be afraid to communicate these decisions to your key stakeholders, including investors and team members. Ultimately, you need to come to a consensus on your plan and execute it.
If your product or service can be moved to an online platform, this could be a good time for user acquisition, capturing early adopters for your services. It may not be the best idea to monetize it; you should keep the friction as low as possible in a time like this.
Explore ways to encourage online conversion. Take a look at what Amazon is doing by giving out free content, what Zoom is doing with free video calls for schools. While it’s a gesture of goodwill by these companies, they’re also seizing this opportunity to educate the market on their brands and product offerings.
Look Beyond Fear
As an investor who has been in business for 20 years, I know for every crisis, there are opportunities. You just have to look beyond fear and understand the opportunities that lie ahead in this new world we are in.
There’s always hope.
