August 31st, 2022 | By: Wil Schroter | Tags: Emotional Support
We can't win every battle, so sometimes we just need to live to fight another day.
I learned this lesson early in my startup career (the 90s), at a time when everything was going "up and to the right" for absolutely everyone. During the boom times, our biggest problems are staffing up, raising capital, customer acquisition, and scale.
And then one day they go the other direction. The markets dry up, "How fast can we staff up?" is replaced with "How do we make payroll?" and suddenly we're talking survival versus strategy.
We don't talk much about "survival" as a startup strategy, partially because it's not fun to talk about, and partially because we hope never to think about it. But lo and behold, if we plan on running a startup for any time, we will learn this lesson whether we like it or not.
Surviving a downturn, whether it's a market correction or just some tough times in the business, is absolutely a strategy. Many startups go through periods of expansion and contraction before they ever truly get their footing. The likelihood that we can perfectly plan every staffing, marketing, and product decision in unison is very low, so invariably we're going to have to backtrack and regroup.
Sometimes successful regrouping is the most effective thing we can do at our startup. What we're really talking about is buying back time. We need time more than anything to reset, reload and refocus. That should be our goal.
For those of us raising capital, survival is no longer about raising on the best terms possible as much as it's whether we can raise at all. Yes, we're probably going to raise a "down round" at a shitty valuation and terms. It sucks; there's nothing cool about watching our paper net worth and equity get eviscerated overnight.
Yet what we really need to come to terms with is the fact that whatever the situation was before, it's gone. Things have changed, our last valuation is a dinosaur, and all that matters now is having enough money in the bank to be around long enough to matter at all.
If all we think about is the cap table we're losing sight of the bigger picture, which is the end game — which in the event of a funded company is of course, a sale or IPO.
What we should be most terrified about is doing nothing at all. Many startups have met their fate simply by not reacting quickly or being too proud to appreciate what was really happening. This isn't the time for pride, this is the time for decisiveness.
Letting go of staff sucks. Publicly indicating to the world that we're shrinking sucks. Damaging internal morale sucks. These are all the motivators that prevent us from taking action when we need it most. But good leaders can take a punch, and if we've really been around the block for a minute, it won't be the first or last punch we take.
Startups need to put survival above all else, no matter what form it needs to take in the near term. There will be a time when we look back and tell the war stories of this very moment, but unless we survive, that story is going to be a cautionary tale, not a comeback victory.
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The Benefits of a Hard Reset Sometimes having to burn it all down is the best medicine our startup can take.
Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes Bizplan, Clarity, Fundable, Launchrock, and Zirtual. He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement). After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do. He's a seasoned expert at starting companies and a total amateur at everything else.