Sell more, is obvious advice here. My problem is I’m a solo founder so I wear all the hats, and I love to code and research and architect. I don’t “love” to pitch, and convince people I’m legit and show them how I can help them. Pretty confident I’m not alone in that. We geeks must sell.
Startups running out of cash right now can cut costs, yes, but the only path to long term survival is to sell enough to cover your costs. For that you need a list and a pitch / script (or a SaaS platform funnel)
It’s a turbulent time. There is almost someone out there struggling who would pay for what you’re selling, but not the way you sold it before this crisis. If not, there’s almost surely someone out there who can use a different application of your skills.
And you know what? Business isn’t the end of the world. A living human can rebuild a dead business. A living business can’t rebuild a dead human (unless Peter Thiel became a necromancer recently)
To share my story (which contains a lot of luck, so, or rather good "timing"). I started my small logistics / supply chain start-up last October, theplan was to have first, meaningful discussions about prices and contracts in June / July and have first revenue in August / September.
Pretty privileged to be ablt to afford almost a year without revenue, right? My targeted market was solar modules from China / Asia to Europe and eCommerce fulfillment logistics.
Now, with logistics in place (software not so much), covering th whole chain from China to consumers in Europe I am talking to organisations in germany to help them et supplies from Asia to hospitals and so on. I am basically selling three months earlier than planned. And i realized that my enxiety about reaching out to customers and try selling my services is all but gone after a couple of days.
So: Sell more. Get revenue.
And don't be greedy. The whole idea of getting into medical supplies (I am not going to charge more than my own minimum salary and actual costs) comes from an inquery to run logistics for a business importing hand sanitzer to be sold through Ebay and Amazon. Show some business ethics. Nobody expects companies to turn into charities, but at the very least don't charge more for customers during crisis because of the crisis than you would have otherwise. Should be great for a long-term relationship.
It’s a huge struggle to stay motivated during a crisis, especially when your co-workers are leaving. And this goes for founders, too.
Some show on HGTV about crazy houses interviewed a guy with a crazy big house. He had stuff in his house like a private shooting range.
He said he had flown more than a hundred missions while in the Air Force and been shot at in all of them. He figured commercial real estate would be easier to deal with than that and he ended up making a killing, probably because he had nerves of steel compared to most people.
Right now is not a good time to do something like volunteer in a homeless shelter to get perspective, but you can read up on the problems of people who have it worse than you. Everyone is in a world of hurt right now.
Everyone.
Even rich and established people are scared and trying to sell off assets to cover cash flow needs.
Your burden isn't particularly bigger than that of anyone else during this crisis. If you don't show up and rise to the occasion, tomorrow is worse.
Humanity has survived other big crises, like World War II. This isn't the first time and it probably won't be the last.
I'm trying to be helpful. Recent years were much tougher for me than this is proving to be. I spent several years homeless, etc.
(insert encouraging words or grim humor here, whichever is your cup of tea)
I also don't have an account, so I got the same message as you. I wonder how Medium decides which stories are fenced with "create an account" page and which not, because most of the stories I can read normally.
I went through a near-failure experience with my startup at the end of 2017 and wrote about how we just barely got out of it. Sharing in case it helps someone given the current climate [1]
The advice in this article is pretty good. Pinning hopes on the next funding round or putting half measures in place like a 10% layoff when you really need a 50% layoff isn't a sound strategy. My main takeaway from my own experience is that I should have made the hard calls much sooner. 100% transparency with the existing team is also important. If they don't understand why a tough decision is being made, they're less likely to stick around.
On a personal note, a neighbor working for a food services company, serving FAANG size companies was converted from a full time to contractor, and then furloughed.
By his own admission, his employer didn't have enough cash for for other alternatives. There are sometimes no easy ways to deal with running out of cash, especially during a crisis such as this.
In industries reliant on just in time delivery, including that of cash, back inventory and cash piles are non existent. This crisis should be a reason to explore contingencies for such companies/industries
Edit: from another trending HN article [1]: "companies need buffers to face uncertainty –not debt (an inverse buffer), but buffers."
I run two companies, one is a passive income SaaS business and the other is a CRM consulting business.
Inbound inquiries into the SaaS business have dropped off. That business helps drive sales but traffic is basically gone because businesses aren’t looking to buy another $1k/mo tool.
My CRM consulting company has had some drop off where customers are putting projects on pause. That said, we still have deal flow, companies are looking to operate during this time of crisis, although we are looking harder to find them.
I’m fortunate because both companies have almost no overhead(contractors + 100% remote) which helps quite a bit.
Companies with a lot of overhead are going to be in a world of hurt relative to those who were already lean or who can pivot quickly.
Figure out break even. Cut costs until you’re there. Do it quickly and decisively and take the absolute best care of your team you can under the circumstances.
Yes to break-even (this is the whole goal of 'ramen profitability') but also don't neglect finding new revenue sources. And that doesn't just mean 'hustle harder' - maybe you can find a side market, or do some consulting on the side, or something.
I'm director at a tech startup in the real estate space. We have about 8 contributors working full time or part time and everyone (directors included) is only getting paid with our own blockchain cryptocurrency. We haven't launched yet and have been running that way for months.
You don't need fiat money to run a company anymore. You can make your own cryptocurrency and it works as both money and company shares. I was quite surprised initially by how willing people were to accept it as payment for their work but now it seems totally normal.
> You don't need fiat money to run a company anymore.
You'll need "contributors" with plenty of fiat money then (or real jobs on the side), unless their land lord and grocery store etc take your token as payment.
You need to re-evaluate the sustainability of your tech startup if it has a very high burn-rate, too much head count and little to no revenue but relying on endless VC funding rounds. If the burn rate is in the millions per month, then the forecast doesn't look good there.
As I said before, when it comes to creating a tech startup in 2020, it now has to compete against the risk of being sherlocked or copied by the big tech companies, scalable to millions and generates a high profit margin whilst also being recession-proof, office or government ordered shutdown proof and now you can add pandemic-proof to the list.
Maybe the lesson to learn here can be what Paul Graham one said: 'You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible.' All points are still relevant but now at this time, it is for startups to make something customers and businesses actually need not 'want' anymore whilst still being able to break even despite the aforementioned obstacles.
Your advice is way too binary. Cash flow crunches happen all the time in bootstrapped startups. First thing is to cut costs because you can do that quickly.
1.) Cut/defer all discretionary costs.
2.) Founder salaries go to zero. They signed up for it.
3.) Defer sales commissions, e.g., don't pay until the company gets paid.
4.) Defer payments to vendors. If it's 15 days net pay in 60. Our customers do this all the time.
5.) Last of all lay off staff. If you can avoid this step it makes your bounce-back way faster.
Do all of this before you need to.
At the same time go after your marketing strategy. Downturns like what we are seeing now also represent opportunities for companies that can reposition to save users costs. Payoff for this will be longer term.
Finally...It's a bit late to point this out, but it's dumb not to setup a credit line when times are good so you can get through cash flow crunches. I would shoot for something that gives you 6 months runway if you can get it.
No. You can always raise more cash or dig your way out. Yes your odds of success lower as your runway dwindles, but it's definitely not game over. I sold my company two years after running out of cash.
You can become a zombie startup, but that's usually a function of poor leadership.
Morbid articles about firing people when you're running out of cash are great. Reminds me not to work with people who don't have the personal integrity to take some responsibility instead of acting like a jerk on the first sign of trouble.
[+] [-] bionhoward|6 years ago|reply
Startups running out of cash right now can cut costs, yes, but the only path to long term survival is to sell enough to cover your costs. For that you need a list and a pitch / script (or a SaaS platform funnel)
It’s a turbulent time. There is almost someone out there struggling who would pay for what you’re selling, but not the way you sold it before this crisis. If not, there’s almost surely someone out there who can use a different application of your skills.
And you know what? Business isn’t the end of the world. A living human can rebuild a dead business. A living business can’t rebuild a dead human (unless Peter Thiel became a necromancer recently)
[+] [-] scarface74|6 years ago|reply
[+] [-] hef19898|6 years ago|reply
This is so obvious, that is easy to miss.
To share my story (which contains a lot of luck, so, or rather good "timing"). I started my small logistics / supply chain start-up last October, theplan was to have first, meaningful discussions about prices and contracts in June / July and have first revenue in August / September.
Pretty privileged to be ablt to afford almost a year without revenue, right? My targeted market was solar modules from China / Asia to Europe and eCommerce fulfillment logistics.
Now, with logistics in place (software not so much), covering th whole chain from China to consumers in Europe I am talking to organisations in germany to help them et supplies from Asia to hospitals and so on. I am basically selling three months earlier than planned. And i realized that my enxiety about reaching out to customers and try selling my services is all but gone after a couple of days.
So: Sell more. Get revenue.
And don't be greedy. The whole idea of getting into medical supplies (I am not going to charge more than my own minimum salary and actual costs) comes from an inquery to run logistics for a business importing hand sanitzer to be sold through Ebay and Amazon. Show some business ethics. Nobody expects companies to turn into charities, but at the very least don't charge more for customers during crisis because of the crisis than you would have otherwise. Should be great for a long-term relationship.
[+] [-] DoreenMichele|6 years ago|reply
Some show on HGTV about crazy houses interviewed a guy with a crazy big house. He had stuff in his house like a private shooting range.
He said he had flown more than a hundred missions while in the Air Force and been shot at in all of them. He figured commercial real estate would be easier to deal with than that and he ended up making a killing, probably because he had nerves of steel compared to most people.
Right now is not a good time to do something like volunteer in a homeless shelter to get perspective, but you can read up on the problems of people who have it worse than you. Everyone is in a world of hurt right now.
Everyone.
Even rich and established people are scared and trying to sell off assets to cover cash flow needs.
Your burden isn't particularly bigger than that of anyone else during this crisis. If you don't show up and rise to the occasion, tomorrow is worse.
Humanity has survived other big crises, like World War II. This isn't the first time and it probably won't be the last.
I'm trying to be helpful. Recent years were much tougher for me than this is proving to be. I spent several years homeless, etc.
(insert encouraging words or grim humor here, whichever is your cup of tea)
[+] [-] Legogris|6 years ago|reply
Maybe it's the right time because the need is certainly there. Not everything has to be done by egotistic motives.
[+] [-] lonelappde|6 years ago|reply
Having less vastly excess wealrg than before? That's a massive stretch for "world of hurt".
[+] [-] jwr|6 years ago|reply
If you want your stories to be read, do not post them on Medium.
[+] [-] jan_g|6 years ago|reply
[+] [-] capableweb|6 years ago|reply
[+] [-] andygcook|6 years ago|reply
The advice in this article is pretty good. Pinning hopes on the next funding round or putting half measures in place like a 10% layoff when you really need a 50% layoff isn't a sound strategy. My main takeaway from my own experience is that I should have made the hard calls much sooner. 100% transparency with the existing team is also important. If they don't understand why a tough decision is being made, they're less likely to stick around.
-- https://tettra.com/blog/navigating-the-depths-of-near-failur...
[+] [-] accountuser|6 years ago|reply
By his own admission, his employer didn't have enough cash for for other alternatives. There are sometimes no easy ways to deal with running out of cash, especially during a crisis such as this.
In industries reliant on just in time delivery, including that of cash, back inventory and cash piles are non existent. This crisis should be a reason to explore contingencies for such companies/industries
Edit: from another trending HN article [1]: "companies need buffers to face uncertainty –not debt (an inverse buffer), but buffers."
[1]: https://medium.com/incerto/corporate-socialism-the-governmen...
[+] [-] shartshooter|6 years ago|reply
Inbound inquiries into the SaaS business have dropped off. That business helps drive sales but traffic is basically gone because businesses aren’t looking to buy another $1k/mo tool.
My CRM consulting company has had some drop off where customers are putting projects on pause. That said, we still have deal flow, companies are looking to operate during this time of crisis, although we are looking harder to find them.
I’m fortunate because both companies have almost no overhead(contractors + 100% remote) which helps quite a bit.
Companies with a lot of overhead are going to be in a world of hurt relative to those who were already lean or who can pivot quickly.
[+] [-] digitaltrees|6 years ago|reply
[+] [-] taneq|6 years ago|reply
[+] [-] huxflux|6 years ago|reply
[+] [-] cryptica|6 years ago|reply
You don't need fiat money to run a company anymore. You can make your own cryptocurrency and it works as both money and company shares. I was quite surprised initially by how willing people were to accept it as payment for their work but now it seems totally normal.
[+] [-] Luuseens|6 years ago|reply
[+] [-] luckylion|6 years ago|reply
You'll need "contributors" with plenty of fiat money then (or real jobs on the side), unless their land lord and grocery store etc take your token as payment.
[+] [-] fraktl|6 years ago|reply
Can it scream "do not read, there's nothing useful here" any louder?
[+] [-] neonate|6 years ago|reply
[+] [-] seizethecheese|6 years ago|reply
[+] [-] rvz|6 years ago|reply
As I said before, when it comes to creating a tech startup in 2020, it now has to compete against the risk of being sherlocked or copied by the big tech companies, scalable to millions and generates a high profit margin whilst also being recession-proof, office or government ordered shutdown proof and now you can add pandemic-proof to the list.
Maybe the lesson to learn here can be what Paul Graham one said: 'You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible.' All points are still relevant but now at this time, it is for startups to make something customers and businesses actually need not 'want' anymore whilst still being able to break even despite the aforementioned obstacles.
[+] [-] echelon|6 years ago|reply
How the hell do you escape this? I'm terrified of my startup getting cloned and staffed with resources beyond my capability of matching.
[+] [-] qwerty456127|6 years ago|reply
How do you even get there, i.e. convince anybody to invest millions without having a well-engineered business model?
[+] [-] justlexi93|6 years ago|reply
[+] [-] coralreef|6 years ago|reply
Most startups die from failing to gain users, not necessarily because they planned expenditures poorly.
[+] [-] golemiprague|6 years ago|reply
[deleted]
[+] [-] xwdv|6 years ago|reply
Otherwise you risk becoming a zombie startup, that is dead but doesn’t even know it’s dead, and that’s a waste of time for everyone involved.
[+] [-] hodgesrm|6 years ago|reply
1.) Cut/defer all discretionary costs.
2.) Founder salaries go to zero. They signed up for it.
3.) Defer sales commissions, e.g., don't pay until the company gets paid.
4.) Defer payments to vendors. If it's 15 days net pay in 60. Our customers do this all the time.
5.) Last of all lay off staff. If you can avoid this step it makes your bounce-back way faster.
Do all of this before you need to.
At the same time go after your marketing strategy. Downturns like what we are seeing now also represent opportunities for companies that can reposition to save users costs. Payoff for this will be longer term.
Finally...It's a bit late to point this out, but it's dumb not to setup a credit line when times are good so you can get through cash flow crunches. I would shoot for something that gives you 6 months runway if you can get it.
[+] [-] jborden13|6 years ago|reply
You can become a zombie startup, but that's usually a function of poor leadership.
[+] [-] ykevinator|6 years ago|reply
[+] [-] nurettin|6 years ago|reply
[+] [-] stickfigure|6 years ago|reply