Last week, as my attempt to contribute to the community during this crisis, I offered entrepreneurs the opportunity to chat for free 30 minute consultations. I figured, like me, a lot of entrepreneurs were probably home “dazed and confused”. I thought that they could benefit from having someone to talk to.
My social media posts went viral. I had over 10,000 views in the first day. Over the past 2 weeks I have spoken to over 50 entrepreneurs and investors. I received very positive feedback for offering to listen to them for free, but I also learned some things as well. I thought that I would share some of my observations.
1. People are “dazed and confused”. Some of the people I talked to were either in denial about the current situation or were frozen by panic.
2. There are a few people who are classic entrepreneurs, seeing the opportunities that the crisis has spawned. Some businesses may be able to pivot in some way to take advantage of some of the opportunities. New entrants will also be able to jump on some opportunities.
3. My outreach was founded in empathy. I believe that this emotion was the reason that my post resonated with so many people. This says to me that the best communication mode in this environment is to either say nothing or say something empathetic.
4. Be careful chasing new opportunities. A pivot that takes advantage of the current situation (ie helping businesses go online) is something to consider. However, you may want to tread carefully with opportunities without such a connection right now as it may appear to be too mercenary. It is a good time to reach out to people such as I did. Offer something for free to help them during this crisis. Listen to their challenges. Solving their challenges could be the opportunity for your business.
5. Raising money right now will be challenging.. Everyone is either still in panic mode or are keeping their powder dry for opportunities.
6. Traditional VCs will likely be doing follow on financing for the existing companies in their portfolio that are deemed to be worth supporting. New financings, which will be rare, will be at lower valuations and on friendlier terms for the investor. Remember “Cash is King”!
7. Angels will be even less likely to invest right now. They tend to have diverse portfolios (ie. Stocks, bonds, real estate, etc.). Their venture investing is typically with their “fun” money. As their portfolios have taken a hit across the board as a result of the crisis, they will likely be moving towards higher quality (ie. less risky) investments. Again, any angels who are looking to invest right now will be expecting lower valuations and better terms.
8. The best advice I can give you is to extend your existing runway as long as you can. President Trump has been saying that things will go back to normal after Easter Weekend. Realistically, this will likely go on for months. In any event, however long it lasts, the recovery will be slow and investors will continue to gravitate towards quality investments.
9. People are asking about restructuring their businesses. How do they get rid of debt, leases, employees, etc? There will be opportunities to restructure, especially for companies with a financial sponsor (ie follow on financing from a VC). Speak to your advisors as early as you can so that you can devise a strategy. Creditors are on the sideline for now as they don’t want to appear too draconian. Banks and landlords will likely offer some small concessions, but there could an opportunity to reshuffle the deck if you have financial backing. I’ve had quite a few conversations on this topic. It’s never too early to map out a strategic plan.
That’s all for now. I am continuing to talk to clients and other entrepreneurs. Please feel free to reach out if you would like to chat.
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