>Cancel credit cards and issue new ones so you can zero out expenses quickly. This will end all recurring charges — and force the company to explicitly re-subscribe to all essential services.
If this is required, you're absolutely mismanaging you spending already. It's a nuclear option. If your accounting is so sloppy that you cannot, in the course of a day, pull a list of recurring subscription-like expenses and instead have to take such drastic measures, then you really, really, really need to take that as a sign that your entire accounting needs are not being adequately addressed. Maybe you don't have the right people handling that end of your business. Or maybe you aren't listening to them on best practices because you want to move fast. But if you're burning runway through such awful spending habits, you are literally giving away equity in your business because you can't be bothered to be a good fiscal manager, not to mention a responsible shepherd of your investors' funds.
Sure, and you can look at a list of recurring meetings and people can cancel them. Or you cancel all of them and see which ones get recreated. One way is probably more effective.
I'm not sure which side of the issue you're coming down on... cancelling them all will quickly stop the unnecessary ones, yes. Some will be rescheduled quickly. But if your organization culture is bad enough to require this step, then it means in some cases people didn't know if they're meetings were useful. Some will believe them unnecessary until enough time goes by and you have a preventable disaster that would have been caught if people were coordinating properly.
So whether it's meetings or money, my point stands: If the nuclear option of cancelling everything is necessary, then things are being poorly managed to begin with, and after pushing that nuclear button you need to take a big step back and assess just how you screwed things up so bad that you had to drop a nuke on your enterprise to fix it.
I'm not speaking from a theoretical arm-chair stance on this either. I've been somewhere that took the nuclear approach in various policies. One expense-driven decision was to fire every single worker of a certain type because they thought the classification was being abused. It probably was, in maybe 15% of the cases. For the responsibilities being performed by the other 85%, it was a massive disaster. Essential things went undone. Part of my own job involved analysis of customer trends, and the resulting loss of revenue. Millions of dollars were lost to the nuclear option, not to mention countless hours of busy work justifying re-hires and jumping through hoops for them, all to save a fraction of the money & time represented by that 15%. Did the nuclear option work? I guess? Sort of? Was it worth it? Not in the case I'm speaking about. But even if it had been worth it, it still spoke to systemic issues that went above and beyond the particular problem solved by dropping a nuke on it.
Good lord man. Why not nuke all the buildings in a city and see which ones people want to rebuild?
No, a thousand times over no.
The existing meeting schedule is the carefully calibrated result of a thousand different constraints running into each other and finding a workable balance.
Why would you destroy that?
Best-case scenario, you add a ton of busy work for everyone to re-create the same thing, and everybody loses a quarter of a day trying to resolve who owns which meetings and is everyone back on them.
Worse-case, you inject utter chaos as only half of the needed people show up for key decisions and critical processes grind to a halt for a few weeks.
Sometimes I'm shocked at how cavalier some people can be about management.
>Sometimes I'm shocked at how cavalier some people can be about management
I find this attitude especially prevalent in the tech startup end of things for a few reasons: Most startups start small enough that peer-to-peer relationships and a personal stake & passion all mean that having staff in a role solely dedicated to managerial work isn't necessary. As a result of this, when they get larger, they undervalue the need. As a result of that, as the need arises, it is poorly done, furthering the sentiment that such roles are wasteful of resources and time.
Outside of this "home grown" disdain for managers in tech, there's also the problem systemic in modern business stemming from the idea of "scientific management" that arose about 100 years ago and really gained traction in the 50's & 60's. Depending on your point of view, it's either fundamentally wrong (in part or whole), or it has simply been poorly implemented in nearly all cases. Regardless, it's what gave rise to the notion that "manager" was a job like any trade, and people could be trained up and deployed as interchangeable pieces in any business. (Which rather ignored the fact that even in trades, there are specialties). It created a few generations of managers that thought actual detailed knowledge of a business's operations wasn't necessary to being a good manager.
I think we're, mostly, past that. (as in past the tipping point moving away from it, not that it isn't still prevalent in some segments of business)
But the two phenomena are where I think the casual disdain comes from in the tech industry for non-engineering managers.
>But the two phenomena are where I think the casual disdain comes from in the tech industry for non-engineering managers.
I don't disagree but I'd add that a lot of tech people are often (and often correctly) focused on some narrow aspect of a problem. At the same time, they're often not aware of or even outright dismissive of broader questions of company strategy, market fit, etc. So they think decisions that are made in a broader context than their particular project are clearly a pointy-hair-boss/MBA/etc. problem.
Effective at what? In the short term, nuking all of them will get you fewer meetings, both wasteful and valuable. But it doesn't teach people much, except maybe that their bosses act arbitrarily. The better solution is to coach people on more effectively using company time.
The issue is what things default to. If you have to figure out if you need to subscribe to X or not, it's a meeting, get stakeholders, input, sign off etc all while you have other demands on your time. If you don't get through with it and figure it out, then that service goes to the default - i.e you keep subscribing.
On the other hand, if you cancel everything, then the default will be off. Essential services will require you to go through the hoops again because they are essential.
I think the point was startups shouldn't have non-essential expenses, full stop... if the churn of the nuclear option works out, you really need to ask how so much waste accumulated in the first place.
Exactly. If the the additional chaos and labor of the nuclear option works that much better, then it's a sign there is a significant ongoing cost-control problem. The nuclear option just masks underlying issues.
Being able to move fast means trying new things, not having tons of processes, and taking risks. It doesn't seem like an inherent problem if you sign up for stuff you actually don't need so long as you have the money to pay for moving fast. When you're short on money you need to be more cautious and course correct.
Yes, "be a good manager" (basically what "coach people" means) is kind of hand wavy. As is any statement of "be good at your job".
But if you want specifics: A good manager doesn't need to drop a nuke on the situation: They've paid enough attention to be continuously evaluating their operations and, in the case of meetings or any thing else, asking themselves and their employees, "what are we doing here? what is the value of this activity?" and pruning things as they go. So, again: Maybe the nuclear option is needed in some situations, but if so, it means things have been poorly handled to get there.
"Cancel all recurring meetings" shouldn't be passed around as some trite startup productivity "hack" like the cliche "have all meetings standing up", like something everyone should thoughtfully consider as an insight into modern business culture norms. It should be spoken of in whispers to organizations so mired in their own incompetence that, in recognizing a problem, they can't even think of a good solution except to drop a nuke on themselves.
> So, again: Maybe the nuclear option is needed in some situations, but if so, it means things have been poorly handled to get there.
When we've done this, everyone on the team was on-onboard and bought in. It's not like people walked in one day and all the meetings were gone - that would break trust.
The fact that everyone agreed it was the only way forward doesn't mean something didn't go very wrong to get you there in the first place.
I'm not saying don't take this sort of action. And certainly, if you have to, the way you went about it is probably sensible. I'm saying that well-run operations don't have to do it at all.
In which case, maybe the labor of getting everybody onboard and bought in would be better put to getting everybody to learn to not create the problem in the first place.
I in fact have. It's not handwavey at all; coaching people on particular skills is something managers, mentors, and coaches do on a daily basis.
It can be very effective at solving the actual problem. If that actual problem is people not having a skill. Like good time management. Or judiciously using the time of colleagues.
Also cancelling your credit card does not cancel your subscriptions! Try explaining to Salesforce that you don't really need to pay that bill, you see you cancelled the card...
Then explain the same thing to the factoring services, and to then to the guys that are hauling away your laptops and servers. Just cancel your service like a normal person/business, save yourself a lot of grief.
There are whole products and features dedicated to this problem [1].
Really though it’s a question of priorities and limited bandwidth. Usually for start-ups the priority is to grow top line whereas a few percentage points of extra OPEX is forgivable.
Deliberately flying loose with procurement to move fast in the "low top-line, low OPEX impact" sense is not the same thing. That can still be deliberate, and have careful oversight. What I'm talking about is the inability to operate any other way, so much so that your best option when things get tough is the nuclear one. My thinking on this is simple: If an organization finds itself in a position where dropping a nuke on itself is actually a reasonable option, they have done something very wrong to get there.
Such nuclear options should certainly not be handed out as blanket advice or "something to consider". They should be spoken of in tones such as "If you've really screwed things up bad, then here's what you do....".
I've worked somewhere that such such tactics were common place. Sometimes they were the only way forward (and yes, that meant we had much, much bigger problems). Sometimes they weren't necessary, an over reaction, and the chaos & destruction took years to recover from. In one case we lost roughly $10,000,000 over about 5 years in order to save about 1/10th of that.
In a start-up there are nearly infinite problems to solve and one of the most important skills is to figure out the sequencing.
So, you figure out what to sell, you figure out how to sell it, then you figure out how to build it.
After you can do that a bunch, then you fiddle with the knobs and controls to grow the business.
Early on, the top priority isn’t accounting because it doesn’t apply any leverage. It’s basically a downside risk problem and you do what you need to do and focus the rest of your resources on product, eng, and growth.
Is it better to just shut down now? For his example business, a corporate catering business, the answer is probably yes. That industry is going nowhere for at least a year and may never come back. After the epidemic is over, many people will still be working from home. (Commercial real estate is going to be hammered. Watch them scream for bailouts.)
"The number one existential threat right now is running out of capital." No, the number one existential threat is running out of market. If you're a cruise line or a convention service, there's no market. Doesn't matter how much capital you have, it won't help. On the other hand, if you're selling work-from-home tools or face masks, you have plenty of orders and can get capital.
You seem very certain about your predictions; do you believe you have some non-obvious insight?
REITs, which own and rent out a great deal of commercial, industrial, and residential real estate have already dropped in value, losing 50% of their market capitalization in many cases. Most vacation and luxury related companies have also dropped precipitously in value.
It seems you think the market is underestimating the damage; how much money have you bet on further drops?
Startups are built on feedback. Those first customers aren’t just cashflow and validation, they are a vital source of guidance for product/service direction.
My customers are sport associations and federations, and they are 99% in hibernation right now. It’s not runway I’m short of, it’s feature requests.
> It seems you think the market is underestimating the damage; how much money have you bet on further drops?
Given that the fed is printing money hand-over-fist, and throwing it at the market, it's quite possible for the market to become completely disjointed from the main street economy.
If it weren't for the printing presses working overtime, there wouldn't be any talk of any v-shaped recovery. Instead, we'd all be panicking over the unemployment numbers.
What's the alternative? I don't get how anyone thinks that things will just go back to normal anytime soon.
ATM everyone is talking about flattening the curve. The big question is: then what?
All the curve flattening is doing is removing pressure of medical staff. It isn't a solution. Vaccines are a long time off, and otherwise people are taking stabs in the dark about other things which _may_ help, but the truth is we most likely aren't going to have anything reliable in the near future.
So what options do we have?
After the flattening of the curve if we go back to "Living normal" then the virus will simply pick up again. "Herd immunity" they say - which might not be 'too bad' in theory, but it will overload the current medical systems, and we'll be forced to go through this process all over again.
You can try an elimination approach, and perhaps for a small island based country like New Zealand (that got started early) that might work, but for everyone else it's really not an option.
The world right now is literally buying time. It buying time in the form of economic output, and right now all these measures are being pitched as a temporary solution. But the thing that everyone doesn't seem to be paying any attention to, is: what is the long term solution? And unfortunately I think the answer is that we don't have one.
It’s a unique situation though in that the trigger for the collapse of these markets was not underlying economic issues in the markets themselves.
Unless you assume that the virus will never go away or that we’ll all develop permanent agoraphobia, you have to figure many of these markets will come back strong eventually.
If you can find a way to weather the storm, you’ll be in a great position for the rebound, since much of the competition will probably get wiped out.
This is absolutely bonkers. People still eat. People wil eat in the future. There will be corporate locations and events that will need catering in the future.
> Doesn't matter how much capital you have, it won't help.
If you have enough capital you could weather it for years. At some point, people are going to have conventions again.
> This is absolutely bonkers. People still eat. People will eat in the future. There will be corporate locations and events that will need catering in the future.
I think you're missing the point. People who go into offices will still eat, sure. But a startup focusing on corporate catering is betting on a sizable and specific market that's built around in-person work and relatively well-off companies being so flush with cash and desperate to hire that they provide catered meals.
That could well come back. But it could well end up being seen as just a crazy artifact of tech boom times, a perk that died during a global pandemic, multi-year recession, and subsequent reallocation of capital to other sectors that don't depend as much on keeping a small number of used-to-comfort workers happy.
> relatively well-off companies being so flush with cash and desperate to hire that they provide catered meals
Providing food for workers is a pretty basic thing to do in any industry at any cash level. Even old style factories provide a cafeteria. Even a prison needs to feed people!
I would like to see some data on that. I worked in a few different factories and never saw that; the best I recall is coin-op vending with dubious sandwiches. And I've consulted for a whole bunch of companies over the years; the ones that provided free on-premises meals were rare indeed.
Except most of that is not free for the worker. A lot of it is actually run for profit by subcontractors.
And if you have to pay out of your own pocket, you probably wont hire catering.
The only people outside tech getting their meals paid by work are usually higher ups, and even then not neccesary.
Corporate catering is a market that is mostly not serving “tech.” Businesses of all sorts use catering. Car dealerships have promotions with “free barbecue,” random offices have lunch meetings with catered food. Retail stores often cater food for employees during inventory. Holiday parties are huge business.
Thinking that corporate catering is “food for overfed tech workers” is a ridiculous simplification. Corporate catering is worth billions and it isn’t even a majority of “tech companies,” who buy those services.
Reading the case study in TFA, it really doesn't seem like they're talking about car dealerships offering barbecue for an afternoon. Their focus is on delivering meals to office workers, and from the language I don't think they're talking about the occasional lunch-and-learn. Especially when they talk about "restart rate" I read it as regular catered staff meals.
> If you're a cruise line or a convention service, there's no market
Cruise lines are in a rough place. Same as airlines.
Lots of convention and vacation related businesses might face a more interesting dynamic. I briefly worked for one in college. Their fixed costs were probably less than $500/year and they kept low six figures in the bank (very high variable costs, mostly enterprise clients, and a fairly old-school owner).
Lots of small travel-related business can “survive” basically in perpetuity. But they will probably face a lot of new friction when events held at the convention center start running again. They can burn capital to stay alive and feed the owner in the mean time, but as that capital burns away, so does the business's feasibility (because of cash flow issues). Bankruptcy and business closure rates are going to vastly under-estimate the number of small business that de facto die out.
> "After the epidemic is over, many people will still be working from home."
Rather improbable. The consensus at my employer is that working from home has been, at best, a mixed blessing. Personally, I can't wait to go back to the office despite the fact that I detest open-plan offices.
It would be better, but it would be that much better for me at least. I miss sitting next to my team and interacting spontaneously. Zoom and Slack are fine, but it just isn't the same. YMMV, but my sense from talking to people is most people prefer being colocated in an office.
And for introverts, the reverse. Your sampling migt be biased (anecdotally, in my team of 8 people, 2 want to be in the office, and 6 would rather keep working from home).
That was my intention, yeah. I don’t want people to die for my convenience, I just mean these circumstances are significantly worse for most people than WFH would ordinarily be.
I'm glad that's what you meant, and I apologize for reading it otherwise. There's an ugly strain of "it's just a flu" around here and "better" is ambiguous. :)
No offense taken! Misunderstanding or failing to communicate clearly in places like this happens all the time normally, let alone when everyone’s a bit on edge. Good luck and stay healthy.
Could be. Although I think it'll depend a lot on how long this lasts. I could see some places not reopening their offices until a vaccine, at which point people may have gotten pretty comfortable with not commuting.
It also depends on how hiring happens. Right now I'm involved with a startup that intended to be fully collocated. But since right now the people we hire are regardless working remote, it's very tempting to hire people wherever they are.
Even if most companies end up nominally back in offices, I think this is going to break the inertia that supports a lot of the "you must always work in the office" rules. So I think we'll see a lot more flexibility in scheduling.
I’ve never interpreted corporate catering as a perk, at least with tech companies. It’s designed to keep employees in the office as much as possible. I can’t imagine that BigTech hasn’t done a cost-benefit analysis and concluded that it’s worth it.
> No, the number one existential threat is running out of market.
The article is specifically written for VC-funded startup founders. That type of company burns capital to fuel customer (not revenue per se) growth. The point of this statement (and the surrounding text) is that you can't do that now, and have to switch to preserving runway and/or growing revenue.
Obviously the number one existential threat is different for each startup. He's simply saying that lack of runway is the most likely cause of death now. Most industries will probably return to normal in 2-3 years time.
One of the hardest parts of leading a startup (or any company really) in a major downturn is managing your employees expectations for their career growth. Many of them will have joined a rapidly growing company - ones with the most rapid career path opportunities - only to see the rug pulled out.
Imagine joining a company as a software engineer with expectations of becoming a lead and then a manager?
Imagine joining as a manager and expecting to grow your team from 5->50?
Managing these expectations as an executive and coaching your team through the crisis is a vastly underappreciated skill. We focus too often on what your equity will be worth as a means of motivation.
Convincing a talented engineer whose equity went from $1m->zero overnight that all it takes is 'grit' to make through to the other side, that's when experienced management pays off.
And its not all deception. For all those that are convinced to stay on a sinking ship, there are a few that flee only to discover they missed the big payout.
I know one who was an early Tandem employee. He left because he had only a Masters' degree, among all those PhDs. They never respected him, never considered him for responsibility nor much equity. So he left to pursue another degree. Later of course had he stayed, he'd have been a millionaire many times over from even the little equity he'd had.
Another was working on a 3270 emulator for the PC, only to have IBM announce their upcoming product just as his was about to release. So he left the floundering company to get an MBA. Later they pivoted to release the network part of their software as Banyan Vines, which was a worldwide best-seller.
Not all deception, just mostly... For every one of these examples, there's tens, probably thousands, of people who stayed on at a "promising" startup. They drank the juice and swallowed the lies, only to find out their equity was worth nothing or close to it. The truth is they would've been better off at the megacorp, investing their spare change into the public markets.
Most startups fail. Most employees get nothing beyond the experience and the paycheck they earned at the time. It's important to keep that perspective when considering outliers of the "if only I had done <x>!" variety.
Which isn't to say employees should always abandon ship, just that they should be clear-eyed. It's a great time to really consider if the risky $1m+ potential equity payout you signed on for still looks as shiny & filled with potential right now. Heck, even if it is still a great idea with solid execution, if they can't survive the next 6-12 months then it won't matter.
I appreciate what you are saying but the reality is, at least from my personal experience through a number of crises, is that once the stock is significantly damaged, stock-compensation-heavy companies should just expect to lose their top tier talent. I have seen it happen over and over. It is better just to accept that it will occur.
I have never, ever seen experienced management be able to recover the situation. What really happens, though, is: if your company was not already running lean, and had a good amount of redundancy, you will lose some of your top tier talent but not all of it, due to reasons such as inertia, sunk-cost-fallacy thinking, true belief, family circumstances beyond your knowledge, and so on. One of the lessons that crises teaches is that slack in the system and redundancy is actually good. The experienced managers then credit themselves instead of these factors.
One interesting takeaway is that lean startups, that can't lose more than one or two of their senior engineers, die in these situations.
"Imagine joining as a manager and expecting to grow your team from 5->50?"
This is extremely rare and opportunistic situation, that some people may not get their 'promised Ferrari right away' should only be a problem for those with the lack of maturity to grasp what's happening in this world.
Also consider that said situation is not isolated and almost everyone is in the same boat.
Hmmmmmm... I wonder exactly what sort of coaching we’re talking about here.
If those people are better off going to places where their career still can grow (perhaps large companies), the right thing to do is encourage them to make that move. Are we talking about that?
Is that talented engineer really best served by a pep talk about grit? Or do you just need them to stick around?
This is an excellent resource for early stage founders like myself at this time.
My personal key takeaways:
- Locomotive effect may propagate later stage disruptions onto early stage businesses. Macro shifts will affect micro-level economics sooner or later.
- Doing nothing is a decision and in this climate it's often better to react and plan aggressively starting now.
- Runway matrix & scenario planning are great as a reference. Make these assumptions and gameplan a living doc so you revisit them from time to time.
- "$1 today is much more valuable than $1 in two years" especially in a recession
- "Especially in a downturn, people want to give money to companies that don’t need the money.”
- Many of your potential customers will be laying off engineers, so focusing on a "buy instead of build" message can really help your sales pitch.
- Expect fundraising rounds to take much longer (6 months plus) for the foreseeable future
- Don't forget the personal side of things and how everyone's family may be affected in unexpected ways
- To shine a light on potential and reframe your mindset, ask yourself: What are the unexpected opportunities that have come out of this chaos already?
The most useful takeaway for me was: “In 2008, the average Series A company raised $4M on a $28.5M post. In 2009, it was considerably less with an average of $3.5M on a $14M post — half the valuation of the year before. And there were 30% fewer Series A rounds overall."
Battening down the hatches and cutting costs is common sense.
But, actually quantifying how much harder your next raise will be is helpful. Congrats to anyone who wasn't depending on it!
If this is required, you're absolutely mismanaging you spending already. It's a nuclear option. If your accounting is so sloppy that you cannot, in the course of a day, pull a list of recurring subscription-like expenses and instead have to take such drastic measures, then you really, really, really need to take that as a sign that your entire accounting needs are not being adequately addressed. Maybe you don't have the right people handling that end of your business. Or maybe you aren't listening to them on best practices because you want to move fast. But if you're burning runway through such awful spending habits, you are literally giving away equity in your business because you can't be bothered to be a good fiscal manager, not to mention a responsible shepherd of your investors' funds.