Your Start-Up and the Covid-19 crisis
- 1. Your Start-up and the Covid-19 crisis Best practices to deal with current situation and to come out stronger 24 March 2020 From the DN Capital Team
- 2. Agenda 1. Measures on lowering burn & extending runway 2. General business practices to adopt 3. Best HR-practices for remote work 4. Potential opportunities now and in the near future 5. Examples of companies showing positive impact during current crisis 6. Useful measures and resources by country Germany UK France Spain US 7. Appendix 2
- 3. Measures on lowering burn & extending runway 3 Lever Description OPEX Impact Review of all recurring expenses (licenses, office, etc) Reduce server costs (targeted cut-off of feeds) Stop of all Business travel Stop of all events (i.e. Offsites, Conferences) Cut/Renegotiate Marketing and Sales spending strategically Renegotiate external contracts (Consulting, external scraping) Create an overview and reduce unnecessary overheads CEO approval for all newly incurred costs Status Medium Medium Medium Medium Medium Low Low Low Lower burn Lower burn Lower burn Lower burn Lower burn Lower burn Lower burn Lower burn Understand new market opportunities Adapt product/market to new conditions Evaluate potential to raise prices Aim to preserve and leverage customer loyalty Extend run-way / funding Extend run-way / funding Extend run-way / funding Extend run-way / funding High Medium Medium Medium Sales
- 4. Measures on lowering burn & extending runway 4 Lever Description Liquidity Impact Request governmental support for liquidity/tax breaks Debt repayment holidays High focus on accounts receivables collection Build Cash-flow model on a daily/weekly basis Tight inventory control Monitor bad debt/liquidity of key customers Re-negotiate payable days Status High Medium Medium Medium Medium Medium Low Extend run-way / funding Improve Cash position Improve Cash Position Improve Cash Position Improve Cash Position Decrease risk of future cash flows Improve Cash Position
- 5. General business practices to adopt 5 General measures / preparation Create a COVID task force overviewing the potential impact on various workstreams and verticals Daily check-ins for top management to understand impact on business across functions and align on goals and targets for next days and weeks, review weekly Clear overview over core KPIs on a Daily and Weekly basis to determine impact on business and be able to undertake mitigating actions Perform a stress test of financials and create a contingency plan Understand legal conditions of your contracts Double-check insurance policies to understand potential impact on your business Follow closely government and local councils communication both in terms of restrictions due to forced closures, restricted movement, WFH etc. as well as their support programs for SMEs Build a plan for how to return to business as normal on a gradual basis Keep up to date with latest info from WHO, other authorities and media to be able to predict the upcoming days and how that will impact the business and your employees
- 6. General business practices to adopt Travel Cancel all business travel according to government guidelines and regulations Work setup Pro-actively encourage home working as much as possible Allocate budget to help employees optimize their home working environment Meetings Move meetings to videoconferences if possible Implement a good remote solution for communication, e.g. Happeo, Slack, Whatsapp Business divisions Split employees in business divisions (e.g. product, marketing, finance) into teams and rotate their office attendance so that all members of one team are never in the office at the same time helps prevent a whole team being taken offline by illness Employee health & hygiene Follow recommended health & hygiene guidelines Try to maintain social distance in the office and regularly clean surfaces and equipment Customers Communicate transparently with your customers about what your business is going through and the business benefits as well as the cost savings they get by using your software or service 6
- 7. Best HR-practices for remote work 7 Adjusting to working from home Routine: get up at the time you normally would for work and get ready for the day, routine is key Home office: if possible, set up an area which is the office and make it comfortable and productive Teamwork: if you are sharing a flat, treat your flatmates as colleagues brainstorm, advise and keep each other motivated Lists: maintain a prioritized to-do list, a good organization is more important than ever when you work away from colleagues Communication: keep your team updated for things to run smoothly and to avoid mistakes Self-care: take the time for a lunch break and turn off the laptop at a reasonable time, do chores to break up your day Maintaining a positive team atmosphere Enhanced communication: communicate online more than you usually would, use group chats and also engage in casual conversation Virtual events: some companies are taking events like exercise / music sessions or wine tasting online, why not try it out? Staying upbeat: a digital consultancy in the Netherlands has launched a daily Wheel of Fortune competition using Zoom and the online tool Wheel of Names, where the winner receives a lunch delivery of their choice Examples of tools to adopt Videoconferencing: Zoom, Skype for Business, WebEx Communication and organization: Happeo, Slack, Google Hangout, Microsoft Teams, WhatsApp Files accessibility: Dropbox, Google Drive, OneDrive
- 8. Potential opportunities now and in the near future 8 Sales Redefine Target customers Not all industries are affected focus on customer segments that are least hit Sales Push in new ways provide webinars (especially on days when otherwise conferences would have been scheduled so your prospects should be more free anyway) Add incentives for current customers to refer new customers Customer Success Proactive reach-out show your customers can trust you no matter what Customer needs potentially changing customer needs may persist once the crisis passes Product Rethink your product think about how the world will look like after this crisis - and try to build a product ready for a post-crisis time (many great companies and new products succeeded because/after previous crises) Help clients serve their customers for B2B businesses, think about how your product could better help your clients through the pandemic period Accelerate roadmap features consider early / free / discounted release of features that assist companies in dealing with the coronavirus reaction M&A Potential targets Not all companies will survive; if you are in the luxurious position that you might be able to acquire some of them (or their customers) at some point in the near future..? Keep your eyes open as some opportunities may emerge
- 9. Examples of companies showing positive impact during current crisis Foodles - free fridges and food for hospitals Cubyn free storage for necessities OpenClassrooms - free education for 3 months Studytube - free online learning (250 online trainings, 500 microlearnings) CodeSpark Academy - free resources to learn to code available to closed schools Glovo - free delivery for pharmacy products across Spain Guild - offering Guild free to any event organiser who has an event cancelled in the next 6 months Busuu - is offering free language lessons to children affected by coronavirus school closures Loom - a video recording and sharing service has made Loom Pro free for teachers and students at K-12 schools, universities, and educational institutions Clear Ballot - helping US states manage their e Genially - premium presentation templates and resources will be made available for free Meero - a file transfer service, is offering free large-file transfers to ease remote working OneDine - offering a free Tap & Pay Touchless Payment system to restaurants during the COVID-19 crisis Jamm - an audio-visual communication tool used by remote and distributed teams is offering it free of charge Happn - online dating people have time and want to communicate Chattermill - AI-powered data analytics company helping companies assess the impact of Covid-19 Happeo - facilitating remote working for companies YASSIR - free ride hailing option for medical personnel and delivery of necessities, free ad hoc telemedicine solution Merlin - making its hiring platform free to use for hourly workers in the US Zivver - helping local governments and companies manage data security in light of new remote working policies Remitly send money to family in other countries you cannot visit in person, and do so without going to a physical location to initiate the send 9
- 10. Useful measures and resources for Germany 10 Source: Sifted, Bundesverband Deutsche Startups Liquidity assistance to companies in need Check if you are eligible for Kfw loans, however, many startups are not as they usually neither have a positive earnings situation nor the usual bank guarantees German Start-up Association is suggesting that start-ups already financed with venture capital from business angels or venture capital companies (VCs) should be able to be financed by a new funding instrument: a "matching fund". This would match the investment amount of the private existing shareholders in a fixed key with a convertible loan and help the company weather the crisis Tax payments deferrals Companies can request to defer tax payments Kurzarbeit expansion Companies implementing reduced hours can receive state support as an alternative to short-term layoffs Bankruptcy rules relaxation Plans to suspend bankruptcy rules to give companies more leeway Resources Bundesverband Deutsche Startups, Kurzarbeit
- 11. Useful measures and resources for the UK 11 Source: Sifted, Gov.UK Tax & VAT assistance Small companies unable to pay their tax bills can ask HMRC for a time to pay agreement which would suspend debt collection Tax breaks and other measures worth 贈20bn to protect companies and households will be provided Govt will support businesses by deferring Valued Added Tax (VAT) payments for 3 months. If youre self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021 Job Retention Scheme Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees salary for those employees that would otherwise have been laid off during this crisis Loans underwriting Government offering loans to businesses adversely affected by the outbreak through the British Business Bank Initial 贈330bn of guarantees announced for loans to support business Sick pay Small companies will be able to reclaim the cost of 14 days of sick pay (just under 贈200) per employee Grants The smallest businesses in the country across all sectors of the economy will be able to seek grants worth 贈10,000 Resources GOV.UK guidance for employees, employers and businesses,
- 12. Useful measures and resources for France 12 Source: Sifted, France Digitale Social charges and tax payments Social charges and tax payments due in March will be pushed back automatically Companies can request to defer payments of social charges and taxes beyond March Tax breaks and other measures worth 45bn to protect companies and households will be provided Liquidity management Possibility to ask for a mediator to recover funds that have been owed to you by your customers for a long time If you cannot make debt payments or loan insurance fees, you can ask for a credit mediator to intervene in your favor and help convince your bank Loans You can ask for a loan directly from Bpifrance or ask for its backing as guarantor to get a loan from your bank Rent & utilities President Macron said that small and mid-sized companies facing difficulties would stop paying rent, electricity, gas and water bills Resources La French Techs Coronavirus Guide, Government FAQ, Bpifrance, France Digitale, Le Monde
- 13. Useful measures and resources for Spain 13 Source: Sifted Relief package The government announced a 200bn relief package, half of which is tied to a public guarantee scheme to ensure liquidity for struggling businesses Tax payments Possibility of deferring tax payments for small and medium businesses and the self-employed. Follow instructions released by the Spanish Tax Agency Loans Payments can be postponed on loans granted by the General Secretariat for Industry State-backed lender Instituto de Credito Official has been given extra means to hand out loans to companies and freelancers in the most affected sectors, including tourism and transport Resources Barcelona Tech City
- 14. Useful measures and resources for the US 14 Source: Sifted, US SBA, US CoC Economic injury disaster loan program The SBA will work directly with state Governors to provide targeted, low-interest loans to small businesses and non-profits that have been severely impacted by the coronavirus in eligible states US CoC is campaigning for cancelled Tax payments and Proposed Loan Guarantees for larger companies Promoting legislation cancelling the payment of all payroll taxes typically paid by employers for the months of March, April, and May Pushing that authorities should work in combination with banks to establish a system of credit facilities, to provide loans and loan guarantees that can be accessed by businesses with more than 500 employees to address disruptions created by the Coronavirus emergency Level of support will vary from state to state The New York City Department of Small Business Services, for example, says it will offer financial assistance to small businesses in the form of loans and grants The San Francisco Chamber of Commerce also plans to petition the government to waive fees for businesses with low margins Washington state, the site of the earliest outbreaks, will also offer no-interest loans for businesses that encounter cash flow problems Check with your local Governor or CoC to get a better understanding of what support you are eligible for Resources US Small Business Administration, US Chamber, Find your local office
- 15. You can help We are going to be regularly updating this and make it more relevant for founders and CEOs Please send us any useful links or information which you think might be useful to other founders and CEOs Ragnar@dncapital.com 15
- 16. 16 Appendix
- 17. Useful Links 17 Best practices from the German Startup association updated regularly Contains resources on Short-term work, insolvency, medical info, tech, HR, remote work, operations etc. Also links to measure lists & stress tests from other VCs: a16z - Coronavirus Resources - updated regularly btov Partners 11-Mar Cherry Ventures 10-Mar Sequoia 5-Mar NFX 24-Mar JetBlue Technologies - Collection of Covid advice 24-Mar McKinsey: Implications for business updated regularly (last 16-Mar) B2B SaaS specific: Crisis Management for SaaS in 2020 Memories of the bad old days (The SaaSgarage) 17- Mar During the Last Downturn The Leads Still Came In (Jason Lemkin (founder SaaStr)) 15- Mar How to prepare your B2B Software company (Joyce Liu (ex-Dawn/CLP) 12-Mar
- 18. Useful Links 18 Overview of WHO policies and recommendations CDC Checklist Sifted: Coronavirus guide Coronavirus Tech Handbook Extensive guide on anything corona-related from Health, WFH, Govt response, Business impact etc. Bain Marketing guide in Coronavirus times Guide on going remote Overview of communicating in a remote environment KPMG Covid-19 guidance for your business Economic situation and forecasts by Inovo Invest Europe Coronavirus Update NVCA Coronavirus Response BVCA Coronavirus update Overview of impact and suggestions of actions by EU-Startups Legal advice for businesses impacted by Coronavirus