April 24, 2020

Startup Playbook in a Sudden Downturn — Resources to help you navigate a changing reality

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As the COVID-19 pandemic disrupted our lives and businesses, C100 began hosting a series of virtual roundtables in partnership with Careerlist entitled: Startup Playbook in a Sudden Downturn. We’ve compiled the key learnings, resources and insights from these conversations for your reference below.

Access to Capital — What To Expect and How to Best be Prepared

Financing rounds could halt to a near standstill in the months ahead. As Geoff Lewis, Managing Partner of Bedrock, says “runway is the new product-market fit.” Startups should target 18, even 24 months of runway. To accomplish this exercise, founders will need to (1) predict how revenue could be impacted 6, 12, and 18 months from now, (2) address cost lines, and (3) strategize how to access capital in a very different market.

1. Predict how your revenue will be impacted. Watch our recent webinar focused on adapting your business plan for recession times.

2. Address cost lines: Reassess your plan for an 18-month runway. Know it and watch it closely:

  • Check out this tool called “Runway” by LTSE, which can help you understand your burn rate by modeling your revenue and expenses.
  • Another major cost: payroll. Because this cost is more than just a line item and it is deeply personal, we hosted an entire Roundtable on the topic with advice on how best to manage your team and keep your business operational. Resources on that in the following section. Bottom line: Be compassionate and generous.

3. Access capital either through pre-existing GP relationships OR new connections you may not previously known or considered: 1) strategic and/or corporate VCs; 2) VCs who’ve just raised a first fund; and 3) venture debt.

  • VCs that have recently closed a first fund present a unique opportunity for founders raising capital: Not only do they have capital to invest, but they don’t have portfolios to help get through the crisis today. We did the work for you and put together a list of “first fund” VC funds that you can find at the end of this post.
  • Angels may be more reluctant to invest in new market dynamics. As many GPs enter into crisis-management mode to help their existing portfolios, their attention span for new relationship-building with new founders may be fragmented (at best). Many will outsource new relationship-building to associates.

How does this impact Venture Capital Funding?

Be prepared for shifts in the VC landscape in the crisis:

1. Potential decrease in interest and valuations in the consumer, travel, and enterprise software sectors. Considering the present environment, we may observe an overall valuation “reset”. Companies in these sectors may want to consider other verticals in the interim where they can find a fit.

2. Potential shift towards sectors for which it has been more difficult to raise capital in recent years, such as medical devices and biotech, to name a few.

3. Potential shift in mantra from “growth” to “profitability”.

4. GPs may find it more difficult to raise new funds, and will spread out their investments more over time resulting in a decline in overall investment activity.

5. Shift from a founder’s market to a VC’s market, for example:

  • Term sheets with less founder-friendly terms, or terms more commonly reserved for late stage rounds, such as liquidation preferences, the ability to block sales, and board seats.
  • In that environment, Founders should want to push back strongly on the aforementioned terms and be opportunistic on what they are willing to give on a financial term.

6. Down rounds and recaps will become more common. In the words of panelist Geoff Lewis: “Down rounds will become the new flat rounds, and flat rounds will become the new up rounds.”

What if business is “up”? Should I still reach out to GPs?

Our VC panelists suggested that, if you can, wait a couple weeks.

When you do, be very clear in terms of why the VCs should talk to you now. (The same rule applies for any time you are trying to get a GP’s attention, but now, even more so, and the reason should not be because you’re in need of money.) Be sure to highlight your team, and how your business is poised to thrive through the current situation and beyond. Startups will be expected to demonstrate that they and their leaders are “recession proof”.

How can I best lead my team through this?

Is there advice for a best team crisis management strategy? Do I conduct layoffs, furloughs, ask everyone to take pay cuts?

If you are in team crisis management working through layoffs, furloughs, and other headcount adjustments, check out our Roundtable on the matter here with Michael Scissons (CEO, Careerlist), Jen Holmstrom (Head of Talent, GGV Capital) and Madan Nagaldinne (Chief People Officer, Blink Health).

Be compassionate and generous, but get it right: “Hiringplan” by LTSE will show you the cost of hiring and rehiring, in terms of cash and equity, for this largest expense line item.

Jen Holmstrom summarized that if you do need to make adjustments to your payroll line, there are really three options at a high level: layoffs; salary reductions; and “furloughs”, but no matter that you do, make sure you have legal counsel involved in the process. But, as our panelists shared in this session and in one on “Adapting your business plan to accommodate an economic downturn”, there are “best practices”, even in the worst of times. Suggestions include:

  • Layoffs: Gary Kovacs strongly urged founders to try to avoid layoffs at all costs, but if they are necessary, do them only once. “Laying people off at this time should be absolutely the last choice”… “The only time to lay people off is when you are going to do it in such a meaningful chunk that it’s going to make a really impactful difference. If you lay off 5%, you destroy 100% of morale and culture. Laying off 20%, you destroy 100%. You do not see immediate benefit, but you do have immediate destruction
  • Salary reductions: Use with executives first. People will accept foregoing bonuses, vacation, and salary freezes, hiring freezes much more easily than layoffs.
  • Furloughs: According to Madan Nagaldinne, a “furlough” is “a leave of absence, of sorts”, where employees keep their benefits, but employees do not perform their job and forego pay. NOTE: Generally speaking, furloughed employees can take unemployment benefits but if you receive “back pay” after the furlough period, they will need to pay back the government benefits. This varies state by state and province by province in Canada, so get counsel if this is an option for you.

One common thread through this discussion: be open, be truthful and transparent with your teams. Projecting transparency will help you and your teams through this.

Has this post been useful? Sign up for our newsletter here for more insights, event invitations, and registration information for our next Virtual Roundtable.

Special thanks to our panelists: C100 Charter Members Janet Bannister (Managing Partner at Real Ventures); Geoff Lewis (Founder and Managing Partner at Bedrock); Madan Nagadinne (Chief People Officer at Blink Health); Jennifer Holmstrom (Head of Talent at GGV Capital), Tihomir Bajic (CEO of LTSE Software); Michael Scissons (CEO of Careerlist); Gary Kovacs (CEO of Accela).This article is a combination of key learnings from the virtual roundtables and not necessarily the reflection of any individual named here.

C100’s List of “First Fund” VCs

As angels may grow reluctant to invest in new market dynamics, and many GPs enter into crisis-management mode to help their existing portfolios, their attention span for new relationship-building with new founders may be fragmented (at best). Many will outsource new relationship-building to associates.

The below is a list of VCs that have recently closed a first fund¹. Not only do they have capital to invest, but they don’t have portfolio companies to help get through the crisis today. New funds may present a unique opportunity for founders raising capital in this present downturn.

Disclaimer: The funds represented below include funds that, to our knowledge, closed in 2018 or later. C100 does not endorse these specific funds in any way. (Help us grow this list! If you know of other fund managers that have just closed their first fund, let us know at



Help us grow this list. If you know of other fund managers that have just closed their first fund, let us know at!

¹Sources: Pitchbook; BDC. Special thanks to C100’s Partners BDC and CPPIB for helping compile this list.


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