COVID-19 Advice for Startups

With so many media write ups flooding the news channels, it’s easy to be overwhelmed by the situation COVID-19 has created. I’ve found it useful to gather the more rational and helpful resources in this article as of 18th March 2020 to help founders navigate through this changing landscape. I’ll focus on actionable advice for founders and end with some silver linings.


Business Consequences

  • Protracted drop off in business activity and responsiveness as workers self isolate.
  • Travel restrictions, cancelled events and meetings will impact business development and partnership discussions.
  • [Sequoia Capital] Disrupted supply chains will have direct and indirect cascading effects. Expect that it will take at least 12 months for supply chains to recover less than half their capacity. As China reopens factories, there will be a high risk some workers will reinfect and restart the shutdown cycle anew.
  • [Square Peg]  Expect business impacts to likely be worse than expected. Productivity drops, irrationality in market behaviour and the effect on team morale. Support services for infrastructure such as AWS and Internet providers will suffer loss of workers and response times will be impacted.

Founder Advice

Revise Headcount

  • [Pear VC] Review overall remuneration i.e. base + bonus. For example, sales teams shift more to the commission side.
  • Cut headcount if the runway is less than 12 months. Make the hard decisions swiftly and do it early.
  • What can be done with less resources to keep the burn rate low? Consider even temporary salary adjustments to extend runways. If you want this gesture to mean something then such salary cuts should hit the founders harder than employees and NOT be deferred salary, replaced with equity or some form of director loan option unavailable to your team.
  • Delay hiring plans especially if hiring in anticipation of growth.


  • Raise money now. Reach out to interested parties who can move quickly and be prepared to accept a flat valuation if necessary to keep the deal. As conditions deteriorate, the negotiating power shift to investors will increase.
  • [Sifted] Raise money quickly whilst VC appetite remains sound. There’ll be less FOMO and more selective behaviour from investors but good businesses will still get funded.
  • [Square Peg] Cash is King. Raising early or too much brings a finite and quantifiable risk in dilution. Delaying or finessing a raise carries existential risks for the business.
  • Reach out to existing investors to bolster the warchest for both defense and in readiness for opportunities that will arise from this situation. VC investors with follow on provisions in their fund will support their portfolio companies’ growth but not use the funds to bail them out.
Photo by Kat Yukawa on Unsplash
  • Maintain a current deck and collateral in case of opportunities to raise further. Revise milestones and expectations in light of changing economic conditions.
  • Step up investor updates and relations. Overcommunicating your challenges and wins will sustain engagement and increase the chances of future support from your investors.
  • [Sputnik ATX] “A lockdown or widespread quarantine could mean that some investors, potential partners or other people you’ve been trying to reach might have more free time. Use that to your advantage and reach out.”
  • Consider funding alternatives such as Revenue based financing such as Uncapped, Clearbanc and Earnest Capital.
  • Consider convertible notes or SAFE instruments to defer valuation discussions and speed up the funding process.
  • Explore non dilutive funding options such as Government grants and incentives.

Operational Management

  • Your 12- 18 month Financial model is wrong. Revise.
  • [Angular Ventures] Take advantage of Work-from-Home savings. Review office rental needs. Accelerate spending cuts.
  • [Sequoia] Cut expenses early and hard. Reduce Sales Forecasts and Marketing Spend. This is from their 2008 presentation;
  • [European Union Agency for Cybersecurity (ENISA)] Review and establish cybersecurity protocols for remote work and take steps to secure distributed workplaces. 
  • Review marketing spend and especially payback periods. CAC/LTV calculations will need to be monitored. 
  • PR spend will be expensive to cut through the noise given everyone’s focus will be on current events.
  • [Angular] With conferences and traditional enterprise sales approaches curtailed, more effort needs to be directed to content marketing strategies to drive organic growth.
  • [Pear VC] This is the time to ask for customer prepayment and give a discount, or other ways to front load cash flow. If that does not work, you can look for contract financing options.
  • Be available to your customers and work with them proactively. They will be going through as much pain as you.
  • Mindful of the previous point to be accessible to your customers, make self service and customer onboarding as frictionless as possible.
  • Position your product/service as part of the solution to the current challenges and help your customers with their stresses.  
Photo by Olav Ahrens Røtne on Unsplash
  • Release a COVID-19 advisory notice on your website and media feeds. It should contain at a minimum;
    • Impact on customers and service delivery
    • Business continuity plans
    • Proactive steps to improve the safety for customers and employees
    • Any changes to locations and policies.
  • Explore building redundancy into your operations and especially your supply chain. Think through contingency plans where you lose some of your team, infrastructure and back end services go down for extended periods (eg. Google). How does the business stay viable and how do you support your customers?
  • Contrary to traditional advice to specialise and conquer a niche, consider vertical integration to de-risk your supply chain.
  • [Square Peg] Balance short and long term needs. Cut costs now and invest in opportunities only if financially strong.
  • [Legalvision] Review your contracts in case of risk of breaching due to performance or delayed delivery. 
  • Update your Terms and Conditions in light of the changed landscape and pay particular attention to your Cancellation clauses. It’s hardly the role of your startup to bear the costs of the commercial decisions of your enterprise customers so ensure your cancellation clauses reflect reasonable costs and lead times.
  • Contact your Tax Office for any relief packages for small businesses. For example, the USA’s IRS and Australia’s ATO have useful information.

Board Considerations

  • Discuss with your board, investors and team on succession planning in the case of the loss of people from essential roles. Have a contingency plan in place.
  • [AICD] As a board we should be thinking about the long term implications and preparing beyond survival. They propose the following questions to consider;
    • Which plans need to be activated and when?
    • Do our plans account for this type of ongoing threat? Do they contain an appropriate focus on employee wellbeing, supply chain disruption, short- and long-term financial impact?
    • What support does management need? What is the best way to support them?
    • Is the business communicating timely messages to both internal and external stakeholders?
    • How are we monitoring the ongoing risks?
    • Are we routinely revisiting and clarifying our priorities as the crisis evolves and the landscape changes?
    • Is the business planning for post-pandemic communications and stakeholder impacts?
    • Are we scenario planning and testing for any negative fallout?
    • Are we adjusting revenue projections if necessary and taking action to boost financial resilience?
  • [McKinsey] summarises larger organizational responses below and highlights the difficulty in getting it right;


  • The constant barrage of bad news developments makes me anxious. I found Shine Text’s toolkit useful to manage the anxiety. Headspace and Calm have released excellent free resources too.
  • Prioritise team safety and minimising personal risk. Handwashing protocols, encouraging flu vaccinations, regularly wiping down work areas and devices will all help set an example. Here’s some information from the World Health Organization, UK Public Health and Australian Department of Health.
  • [MaRS] has some useful templates for employee communications around COVID-19. WHO has a good generic document to distribute too.
  • [The Conversation] has a no nonsense guide on how nutrition can help your immune system when there’s a lot of misinformation clogging the media channels.
  • Your team doesn’t expect expert coverage of COVID-19 but rather open communication and support on things within your control.
  • Be sensitive to the different ways your team may be reacting to the situation and the challenges they’re facing outside of work. These may include caring for children and older relatives or facing shortages and outages at home.
  • Invest and support the tools needed to be productive working from home. Angular and Gitlab have great guides to remote work here and here.
Photo by Andrea Davis on Unsplash
  • Release a company policy and maintain consistent messaging. Think about second order effects. A simple example might be banning all travel but without implementing an appropriate Work from Home policy. The consequent crowding at the office would increase transmission risks. Take a look at approaches of Google and Stripe.
  • [PhilHSC] Be aware of the loss of non verbal cues when holding remote meetings and as leader, set the tempo for inclusiveness and engagement. 
  • [McKinsey] Founders need to cultivate “Bounded Optimism”; confidence combined with realism. Early in a crisis, if leaders display excessive confidence in spite of obviously difficult conditions, they can lose credibility. It is more effective for leaders to project confidence that the organization will find a way through its tough situation but also show that they recognize the crisis’s uncertainty and have begun to grapple with it by collecting more information. When the crisis has passed, then optimism will be more beneficial (and can be far less bounded).

Silver Linings

Photo by Abigail Keenan on Unsplash

Every crisis brings with it enormous opportunity. The COVI-19 pandemic will lead to a New normal that will surface lasting changes across all sectors ranging from the rise of remote working to the acceptance of Artificial Intelligence for remote screening and recruitment. It’s up to you as founders and entrepreneurs to discover and seize it.

  • [Square Peg] Customers may be more inclined to move from higher-cost incumbents to startups offering a cheaper alternative.
  • [Square Peg] Poorly managed and resourced competitors will fade. There will be a reduction in irrational competitive behaviour.
  • [Pear VC] Some operational costs such as office space and recruitment should improve with lack of demand.
  • [Pear VC] Beyond survival, the businesses that will win in the longer term will have strong unit economics, shorter payback times, organic growth and a clear moat.
  • This pandemic has shown the world what global supply chains look like whilst dependent on China. As we emerge from this situation, we will see the foundations of a more robust and resilient supply chain ecosystem less concentrated on any one location or vendor group. Chasing economies of scale and the advantages of just-in-time manufacturing will be balanced with the security of a more distributed and traceable supply chain.
  • The benefits of smart cities and real time transparency on an epidemiological scale has been highlighted in the ability of certain countries to respond faster and more effectively to the crisis. 
  • [Health Transformer] and [Forbes] showcases examples of how COVID-19 will drive innovation throughout the Health ecosystem. 


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