6 Guidelines for Startup Founders in the Crunch
You’ve raised seed funding, built a team, and launched your product. Maybe some revenue is trickling in.
From the TechCrunch view of the world, everything is rosy. But in your gut, you have a sinking feeling. Why? Because with $X in the bank, you only have Y months to raise a Series A round. And you’re way off track. Your DAUs, MRR, and other acronyms simply aren’t growing fast enough.
Some days you have the zeal of a missionary. Other days you feel like you’re running against the wind. Like hurricane winds. Tension is beginning to surface between you and your co-workers. You’re not sleeping your best. You put on a good face, but deep down you’re wondering, Are we going to be among the majority of startups that fail? In dark moments, this evolves to Am I a failure?
Welcome to the Crunch. Your money is running out, and you’re on a foggy island between success and failure. What do you do?
I don’t know your specifics. But having been in my own versions of the Crunch and seen others through it, here are six guidelines that will help you:
Be an athlete, not a robot. #
It’s easy to hide behind “working harder” to resolve your situation. But you’ll perform better at work if you’re sleeping well, eating nutritiously, and exercising regularly. Don’t get me wrong, you should be working your face off. But think of your productivity and performance in a broader context, like an athlete. The best thing you can do for your company is to optimize yourself for peak performance.
Confront your situation head on. #
Denial is a natural tendency for many people in the Crunch, especially eternal optimists who drink too much of their own Kool-Aid. Don’t do denial. Instead, thoughtfully confront the facts and create urgency around making a move while you still have time and money. You don’t have to know what move to make. You just need to convince your colleagues that the situation needs to be confronted. The biggest regret of people who’ve been in your shoes is not acting sooner. Remember: the clock is ticking.
Be curious before being decisive. #
As the leader, you may feel pressure to be decisive and have all the answers, especially when communicating with investors. It’s okay to not yet know! Your job is to confront the situation, and then thoughtfully involve your investors and others in exploring options, framing the decision, and moving forward. I recommend conversations like: Here’s the situation…. Here’s what I see as the alternatives…. What are your thoughts? Create urgency around confronting your situation, but be curious before being decisive.
Be honorable towards investors and employees. #
It’s okay to lose investor money taking your best shot at success. They won’t fault you for that. They will fault you, however, if they sense that you are not being a good steward of their investment. So go the extra mile to protect their interests and not needlessly waste money. In a similar manner, your team has invested their sweat and confidence. Be a good steward of them, too. If you need to cut the team, cut the team — but do it while you can provide a decent severance. I’m not suggesting you have to be perfect, just earnest and honorable in your intentions. Your reputation depends on it.
Be transparent — and thoughtful about messaging. #
The tendency during tough times is to communicate less often with investors and to bury the facts among team members. Instead, error on the side of openness. The virtue of being transparent is that it engenders trust and enlists others in turning around the situation. Why not benefit from other minds? As you do this, it’s important to be thoughtful about your tone and messaging. Do not whine or complain or spread negative energy. Be matter-of-fact with a whiff of can-do optimism.
Pointedly decide and move forward. #
At some point you need to bring things to a decision. Do you pivot, stay the course, raise a bridge round, revamp your product, return funds, restructure the team, or what? Don’t make a half-ass, milk-toast decision. Pretend you have elephant balls and pointedly decide. When you make a definitive, pointed decision, you may be surprised by the burst of energy and focus it provides. It may or may not work, but you are giving it your best shot.
At the end of the day, that’s what this period is all about: giving it your best shot. Keep that in mind, and good luck with everything.