11 Tips for Startup Survival During COVID-19

Mar 20, 2020

5-min read

As Managing Director of Techstars Tel Aviv and a serial entrepreneur, Hilla Ovil-Brenner has weathered the economic downturns of 2000 and 2008. Here’s her advice for startup survival during uncertain times. 

The last few weeks seem like a startup's worst nightmare — term sheets are being pulled, M&As are being stopped, entire industries are getting rattled (just look at the travel-tech industry). For the past years money has been available in abundance, and suddenly it might start drying out. No one knows the ultimate economic impact of the COVID-19 outbreak. However, it seems nearly everyone believes a global economic reset is upon us.

But as always, I believe there are a couple of different ways to look at this. This crisis could turn out to be the greatest opportunity in your company's lifetime — or at least lead you in the right direction. This is, if you show true leadership. Many great companies survived the economic downturn in 2001 and 2008, and some came out stronger than ever. That could be you. 

So this is why I am writing this today. After founding three companies (one publicly traded on TASE), raising millions of dollars, and experiencing two big recessions — I know what this feels like! I still remember receiving one term sheet from Lehman Brothers just a few weeks before they went bankrupt. As you can imagine this didn’t turn out as planned. Nonetheless, I survived, succeeded, and lived to tell the tale.

The biggest take away for me is that CEOs who acted quickly and responsibly survived, but the ones that hoped that it would go away didn’t. I want to help you make quick and needed decisions to help you navigate through these stormy times.

Here’s what I learned by working through two previous downturns:

01. Hope is not a strategy

Create a real plan together with your co-founders and investors and look the truth straight in the eye. Things will get worse before they get better again. Formulate a plan to survive the next year and a half without outside funding. This strategy should guide you to make hard and needed decisions. Make sure that you, your co-founders, and your employees see eye-to-eye on the vision you have and the measures that you will take in the next weeks and months.

02. Be a role model 

Everyone is looking at you for leadership, this is your time to shine and show strength. You need to be a calm leader. Don't panic!

03. Know your exposure 

Your first step is to identify areas of vulnerability, and decide which of these can be mitigated early. Ideally, you have measures in place to diversify revenue or accelerate profitability and make sure that your financials are in order. Have a solid financial model and run financial scenarios (e.g. make projections for the number of customers and think about what happens if your revenue drops to 75% or 50%). This will further help you to know when to pull the trigger on major changes as things play out. 

04. Take responsibility for your employees 

It’s your responsibility as a manager to keep your employees safe. By safe I mean two things. First, comply with government regulations even if it's not easy, and second, make sure that your employees feel comfortable. You might want to put a board resolution in place that allocates a leader in case you or any other board member get sick or need to be quarantined.

05. Communicate with your board and investors

Make sure you are transparent during times of uncertainty and that you give your board and investors comfort. Do not make decisions without them, even if you can do so from a legal standpoint. Make sure they are part of the process. If you do ask them to help the company and give you more funding, make sure you communicate it in advance, and after you have all the facts. Don't create unnecessary panic. 

06. Ask your mentors for advice

I believe in the power of people working together and learning from each other. So go out and ask your mentors for advice, talk to your peers, and quickly validate your business decisions. If you are a Techstars alum also reach out to your Managing Director — these smart people can help you get through this.

07. Extend your runway 

You don't want to be in a position of needing to raise capital during an extended downturn and reduce future financing risk. You can avoid this by reducing your net-burn rate, or increasing free cash flow (or becoming cash generative). Plan to act and stay as lean as possible. It will help you to calculate different scenarios.

Think carefully about cutting a percent of all salaries vs. firing some people. There are pros and cons to each decision. The first allows employees to feel they are all in this together. If you do cut off people make sure it's in “one go” so other employees don't fear being fired every day. 

08. Don’t give up on fundraising 

You never know how investors will react to situations like this. Strong companies will always be able to get more funding, and some investors might see this as an opportunity to get great deals. High valuations may be harder to come by, terms may become more taxing, and the size of a potential investment round may be limited — but they might still happen! Stay optimistic but realistic.

09. Try to stick to the long-term plan 

Do not lose focus of your long-term goals. You shouldn’t let external forces unnecessarily influence your path. I know, it can be tough when conditions deteriorate, but staying focused on long-term goals can help you with a frame of reference by which to measure short-term decisions. It will also help you with a plan for the recovery period.

10. Working remotely can be very tricky

It’s important to stay in touch with all your employees to keep morale up. Daily or weekly calls are important. Be transparent about your plan and the decisions you make, no matter the size of your company.

11. Stay disciplined 

This is good advice always — not just for downturns. This means discipline with costs, forecasting, or hiring. Use this time to establish a culture of discipline for all conditions. Be helpful, smart, and prudent. With an established culture of discipline, you will be in a better position for any shock to the business and it will bring your team closer together.

This is a challenging time. When people talk about entrepreneurship being tough, this is what they mean. It’s a true rollercoaster ride. But remember, it's also a time to grow, shine, and Give First.

I often turn to my role model, Sheryl Sandberg, COO of Facebook, for advice. She once said:

“The easy days ahead of you will be easy. It is the hard days — the times that challenge you to your very core — that will determine who you are. You will be defined not just by what you achieve, but by how you survive.” 

About the Author
Hilla Ovil-Brenner

Hilla Ovil-Brenner is managing director of the Techstars Tel Aviv Accelerator. A serial entrepreneur in the high-tech industry for the past 20 years, she is a true believer in innovation and team spirit. Hilla specializes in turning dreams into reality through passion, experience, and skill. She was named one of the top 100 influential people in the hi-tech ecosystem by geektime. Hill is the Founder of Yaazamiyot, the biggest female founders group in Israel.