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Contxto – I feel it’s all been doom and gloom over the past few weeks. I mean, it’s not like the media isn’t full of sad images and terrible news.
Just in this ecosystem we’ve seen, mass firings, botched lay-offs, and the sudden coming of a capital winter.
Therefore, I was glad to talk to a couple of folks down at MD Partners who still had a spring in their step and determination in their gaze.
Uri Magen-David and Diego Rodríguez, both partners at this startup and venture capital (VC)-specialized financial intelligence services company, were a real breath of fresh air. They had some critically important tips for all you members of the ecosystem. I think it’s important for everyone to keep them in mind. So this goes out to you, dearest founder.
Do not flinch in the face of this adversity.
“Have a clear vision and act decisively.” That is Rodríguez’s chosen formula to concoct the financial alchemy needed to survive the worsening economic crisis.
The contingency steps you will be taking in your company are not just damage control. They will be your first steps to recalibrating your strengths for the post-Covid world.
If you founded a startup before this whole mess you are basically halfway through riding out this storm. It has never been easy to survive in this ecosystem.
Even in the good times, you needed to be well aware of the strengths, weaknesses, and inefficiencies. You needed a minimum viable product (MVP). You needed to know your customer.
Well, nothing has changed. The only difference, says MD Partners, is that if your energy was previously focused on high growth, now it must shift to profit-making and survival.
People think that lean times mean skeleton operations: Fire everyone and pinch those pennies first, ask questions later. Not so.
Take a food industry business on MD’s portfolio. After having a good long think about how to react to the crisis, they decided to grow their staff numbers. Why? Because the company realized that, to survive, it would need a beefed up tech team.
You need to take this opportunity to reinvent yourself too.
Sometimes, the crisis reveals one of the flanks you always had exposed. The aforementioned food company’s business model had to be completely overhauled. They now don’t expect clients to go to them, they go to where the business is. They have become, if not omnichannel, then at least a multi-channel business.
It’s strange if you think about it, this probably would have been a problem even without the bloody virus. The pandemic simply afforded the food business the excuse to fast-track these efforts to future-proof.
The key is, although financial sustainability is important, oftentimes by brutally cutting operations or taking out loans, you’re shooting yourself in the foot.
Consider thinking creatively, streamlining your existing inefficiencies, and perhaps even revamping your business model.
Prove your worth
When push comes to shove, money is what makes the world (and your startup) go round. You will need to carry out all of the above not only to keep your company’s sales/views/purchases afloat, but you will also have to do it to prove your worth to investors.
Truth is VCs do not care how much you slashed costs if you’re not a good business. Blindly cutting costs will show you’re good enough, you’ll need to prove to them that you are intelligently adapting to survive (see steps above).
Proof of smart adaptation will show you’re a survivor, and it will most likely afford you a bridge round to tide you over while the crisis abates.
MD Partners says it is lucky enough to have chosen a strong, diverse, and resilient portfolio. Many of the VCs that come to them for guidance are not so fortunate.
Indeed, many investors are now mulling over either going all-in with some of the startups in their portfolios or cutting their losses wholesale with others.
No one could control this pandemic after a certain point, but you can control how clearly you prove to people that your company is a winner even—or especially—in these hard times.
We’re in it to win it.
Funnily enough, Uri and Diego stood on opposite ends of the spectrum as to their outlook for the future.
Diego is a calm and collected realist. Uri is an eternal optimist. But both still believe in the regional startup and venture capital ecosystem. Both understand that it is up to everyone, not only to pull their own weight but to help out those in need. Solidarity is key, not just during these first stages of the crisis, but in the long haul.
Both warn that this is only the beginning, the beginning of what?
That’s up to you.
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