Newsletter #14: You never want a serious crisis to go to waste
8 minutes reading time. Thoughts on startups, growth, and technology đ
Hey there,
Ever since I read "Coronavirus: The Black Swan of 2020" by Sequoia Capital, I made a habit of studying the best literature on resilience in business. It's my first time going through such an environment, and I will do everything in my control to discover and embrace the wisdom of those who battled similar situations and came out stronger.
More than a month later, I want to dedicate this essay to my findings and thoughts on how we should approach the economic downturn that is already evident across the globe.
I am fortunate enough to have lived in several countries and, as a result, have close friends around the world. That gives me an interesting overview of how people in different countries are bracing for the situation.
My intention here is not to tell you what to expect as I do not know myself. I would instead provide a concise overview of how I am looking at the situation.
One thing seems consistent across people I am talking to; everyone is pretty optimistic and expect things to go back to normal soon.
If there is one takeaway from this essay let it be this one, my approach is to brace for turbulence and have a prepared mindset for the worst-case scenario.
In Sequoia's words:
"Having weathered every business downturn for nearly fifty years, weâve learned an important lesson â nobody ever regrets making fast and decisive adjustments to changing circumstances. In downturns, revenue and cash levels always fall faster than expenses. In some ways, business mirrors biology. As Darwin surmised, those who survive âare not the strongest or the most intelligent, but the most adaptable to change.â
Most business leaders and founders, in particular, are optimistic by nature. How can you start a business if you are not optimistic by default?
Yet, the market has dramatically shifted overnight. Changing your plan to reflect the new reality becomes paramount. I like to prepare for the worst-case scenario, and if anyone proves me wrong, I would be delighted.
Until then, in the world of business, survival boils down to one thing: do not run out of cash. Meaning, you can either become profitable or survive long enough to be able to raise a new round of financing.
Former Oracle CFO Jeff Epstein gives a great analogy here:
âItâs like you are running a marathon with 1,000 other people, and youâre in the lead. Then a truck hits you out of nowhere. You are sitting on the curb bloody and broken, others are still running, and your fighting instinct tells you to get up and finish and win the race. But what you really need to do is go to the hospital to heal, and look forward to running the race next year. â
The lesson here is that your first step is to embrace what's happening. You cannot deny all those indicators telling you how that the world has changed. Consequentially, previous plans are likely irrelevant.
Having said that, there are advantages even at such times when it feels like you got hit by a bus, a bus you did not see coming.
Once the situation is acknowledged, the team becomes better aligned than ever before. The unified enemy becomes the external crisis; people stop caring about internal politics, bleeding products/distractions are eliminated, your partners and vendors are doing everything they can to keep you, and loyal customers want you to survive as they need your product. The crises drives towards a singular outcome: survival.
That's where Rahm Emanuel's quote on crisis comes into mind:
âYou never want a serious crisis to go to waste."
To keep momentum in times of a recession, my focus is on one thing " finding fast-moving water in our market." Are there any areas of more considerable energy and market demand? How can we improve our product to be a painkiller rather than a vitamin?
After-all a downturn is the best time to position the company for growth as all competitors are likely facing the same situation and struggle with moving fast. Many smaller competitors will be running out of cash, paralyzed, and unable to react. Would it be possible to gain ground while managing losses?
Articles/podcasts worth checking out:
đď¸Crisis is Pushing Us Back To Our Roots | Brian Chesky Co-founder & CEO Airbnb | Masterâs of Scale - As the pandemic hit, Airbnb was preparing for an IPO. Within a matter of days, everything changed dramatically, as travel worldwide screamed to a halt. Airbnb responded quickly, announcing that they'd override host rules and allow for guest cancellations. They went on to establish a relief fund, lobby the U.S. Congress, open a line of virtual experiences, and raise an astounding one billion dollars in new capital â all with the goal of both weathering the storm and laying the groundwork for the new era of travel that Chesky firmly believes will follow.
đ28 Moves to Survive (& Thrive) in a Downturn | Pete Flint | NFX Blog - In the face of a global pandemic and a financial meltdown, Founders are confronted with a new reality. The world has rapidly shifted under all our feet. Seemingly overnight, the economic dialogue has changed from measured confidence to murky chaos. If you are running a startup today, this will likely be one of the most challenging climates youâll ever face.
đThe Psychology of Founders Who Win in Downturns | James Currier | NFX blog - Leading my own VC-backed tech startups successfully through the 2000 and 2008 downturns, Iâve noted how great Founders shift their mindsets and psychology during a downturn in ways that drive survival and success.
A quote worth remembering:
The author Esther Hicks on living well:
âIf all you did was just looked for things to appreciate, you would live a joyously spectacular life.â
A book recommendation:
Dapper Dan: Made in Harlem by Daniel R. Day, Mikael Awake -  I always considered myself as a hustler, until I read âDapper Dan: Made in Harlemâ, a story of hustling on a completely different level. The book is essentially the memoir of the legendary designer Dapper Dan who pioneered high-end streetwear, from a storefront in Harlem to the red carpet in Hollywood, dressing everyone from Salt-N-Pepa and Eric B. & Rakim to BeyoncĂŠ and Jay-Z along the way.
Available as an audiobook as well, check it out.
Positive news worth sharing:
The number of people living in extreme poverty has halved. But thatâs not the common perception.
Why? The media rarely focuses on the positive. Pessimistic stories get more attention. We might think we know about the world, but the truth: weâre beating extreme poverty. The UN aims to end it completely by 2030.
Check out the source here.
Onward and upward đ