This is a note for the future, to adapt the company and self through a global pandemic caused by COVID-19. I have full trust that the world will have a better playbook to deal with such pandemic in the future.
Short-term Shock and Long-term Recovery
- While it’s uncertain how long the Covid-19 global pandemic will last, the impact on the overall economy is real, as seen from some of the markets where Covid-19 hit earlier, the consumer industries are already experiencing real loss of business. The travel industry collapsed, airlines in Korea are down by 80%, freights revenue down by 44%, ship manufacturing revenue down by 76%, and so forth. These are not the market caps, but the actual revenue decreases already being realized as months have gone by since the initial outbreak of Covid-19. Now the impact data on U.S. economy is starting to surface and except for a few industries (e.g. digital healthcare, online education, food delivery, grocery, etc.), most industries are getting crushed. Unemployment ratio is rocketing through the roof and companies and physical stores are shutting down with massive lay offs.
- Prepare for a long-term recovery and shift. Pandemics can last multiple months easily (and it’s still on-going four months in). We first saw from our office in South Korea (which started WFH multiple weeks earlier than our US HQ). Even in highly tested and controlled environments, new cases diagnosed is a lagging indicator than the actual spread, so it’ll take time for things to slow down and fully recover. Plan for minimum of 6 months to 12 months of drastic decline/change, then another 12-18 months of recovery time.
Managing the Company
- Be decisive. Be a wartime CEO, and not a peacetime CEO. As in all crisis, delayed action will cause catastrophe down the road. Unlike peacetime, when in wartime, bias toward overreaction than underreaction.
- Be clear. Ambiguity leads to anxiety and anxiety leads to negativity. Communicate clearly and repeatedly.
- Extend your runway to 36+ months as a priority. Historical data on U.S. recession suggests 12-24 months of recovery (sometimes as long as 5+ years, or a short as 6 months). In 2008-2009 financial crisis, a lot of companies went under and laid off a lot of workforce. Covid-19 is and will be much worse. The industries are getting crushed, not because of anticipation in financial markets, but because of actual unemployment, lack of travel and consumption.
- If your company has < 12-18 months of runway and are in the industries that are severely impacted, layoffs might be inevitable. If you have a termsheet, close them asap. If you are in 12-24 months of runway, cut costs drastically to extend it as much as possible. Many companies have opted into decrease salaries and freeze hiring.
- Depending on how your business is impacted, be ready to cut your projection steeply. Steep means anywhere from 25-50% downward projection. (Remember, some industries lost 80-99% of their revenue in matter of months) If you have the runway to survive, then this will be a do-over year for you. But if you don’t have the runway, then the measures need to be a lot more drastic. If your business is the lucky one and is positively impacted, don’t increase your projection immediately, but sit through the next quarter. The impact is a lagging indicator. If you are in B2B, it’s likely that your first quarter in pandemic is relatively good — the deals that were on the table will close. But a lot of your customers/prospects budget might disappear in the next month/quarter. They might be the one going under a lot of downward pressure, so be extremely sensitive to the following quarter.
- Don’t repeatedly cut down budget, but rip the bandaid off at once. Do it once and do it sharply. “Laying off” empty seats are infinitely easier than seats with actual people. Prioritize the hires and focus only on P1 — the essential hires to keep the business going. P2-P3 should be on a hold until the dust settles.
- Cash and profitability is king in all recessions. But pandemic is a level-beyond a pure economic recession, that most industries can never really plan for or hedge against. If you happen to find your company in the lucky-side of the history, be generous and helpful. If not, again, biast towards overreaction.
- Communicate repeatedly, in written form and recorded forms. In remote/WFH situations, synchronous communications can fail magnificently as people may simply miss the sessions, so have a few default channels (whether email, chat, or wiki) and share the written and recorded forms across ALL the channels and remind people repeatedly on the WHAT, WHY, HOW, and WHEN. If you don’t know, it’s okay, so communicate what you don’t know, and how you plan to find it out.
- Fundraising will suddenly be very difficult, as the sensitivity / reaction to financial recession are much higher in financial industries. The information asymmetry will feel much higher as the uncertainty makes everyone withdraw from the situation and preserve cash. LPs will pressure GPs to slow down. Some GPs with fresh capital/fund will still need to deploy, but not in a rush. If you are having a discussion, get to a close as quickly as possible.
- Customers will be impacted all across the board. Go proactively to your top customers and understand what they are going through. Build and provide business continuity plan, as customers are not sure whether you are a vendor that can weather through this storm or not.
- How we work will change in a lasting way. We are now all forced to become remote and WFH. Most (digital) companies will have to cope with the change, while a lot of industries that rely on physical presence will go into sever extinction. When this is over, the recovery may not be as swift. The scars and trauma will be there. Some people will be eager to come back, while some people will have found the new norm and prefer this way of work. Job market will change. Office and facilities will change. And it won’t be exactly like before the pandemic. There will be a decreased level of social trust related to public and workplace hygiene, so it will take time.
- Focus on the priorities and communicate them repeatedly, and align the team more tightly.
Questions to Answer Internally
- What are the must-haves vs nice-to-haves? What roles do we absolutely need to hire vs nice to hire? What are must-have softwares vs nice-to-have softwares?
- What’s our priority? Goals, features, initiatives, campaigns, and roles to hire, etc. Always think priorities in mind. What do we absolutely need to achieve?
- How do we take better care of our existing customers? They will be the ones to carry us through this tough period. A greater focus on NPS is crucial.
- How do we become more financially efficient? Where can we invest more efficiently/differently? For example, instead of traveling (which is practically impossible at this point), what can we do differently/creatively to augment such circumstances? How can we replace physical with virtual across all activities?
- How do we become better at working remotely? How do we increase collaboration and productivity as a company? How do we take better care of people, and learn to thrive in this new working environment?
- How do we invest in our existing people? So that we can learn and develop to be more productive, make better choices, and become better leaders?
- What can we learn from all of this and how can we use this to our advantage? This is a tough challenge, but once-in-a-lifetime learning opportunity for all of us. Global pandemic and economic recession all wrapped into one. But we have the capital to weather through it if we make smart choices.
- How do we hedge the downside of financial crunch? What are creative ways to bring in more resources (revenue, deals, and fundraising)?
Managing Self in the New Life of WFH and Shelter-in-Place
- Find and adapt to the new work-life harmony as swiftly as possible. This means setting up routines, rituals, managing mental and physical wellness in a new way, working environment changes.
- Setup exercise routines (e.g. running and walking around the town, in-door exercise equipments). Measure them through smart watches and wearables to keep yourself engaged with routines and goals.
- Find rituals to keep yourself mentally grounded and engaged. Adopt new reading pattern, resting, going for a drive, TV shows, whatever that works, setup a portfolio of them with time blocks. It’s easy to fall into dopamine addiction without structure and rituals, so design time blocks and routines.
- Get a proper WFH environment up and running. This means high-quality video camera, microphone, headphone, lighting, and even a green screen. Bring your A-game to digital communication.
- Social engagement will be difficult, so things become virtual/digital. Online community activities can help you feel belonged and related.
- Food can actually become a challenge. Groceries are essential, but exposes you to risk, so get gloves, masks, grocery bags, and build process to minimize the exposure and stop the externally contacted parts back into your home. Aerosols are also a known way to transmit COVID-19, so avoid people’s path especially in a closed/in-door environment. Food deliveries are also a risk, so build a small process to protect further exposure.
- Be generous if you can. Donate and support local businesses, healthcare, and our families and community who are impacted severely by the pandemic.
Will update more, but hopefully this captures some of the top-of-mind things for a startup CEO.