If you were looking to raise funding for your startup or scale-up, prospects might have turned a bit darker in the short-term. During this COVID19 crisis, potential new customers and investors are postponing meetings and decisions. Actual customers might be pending their payments… It seems unlikely that the initial revenue targets you’ve set for this year will be met. Your required runway will probably be longer than expected, thus your funding need might also increase. Costs will have to be managed to ensure liquidity and in the long run the solvability of your company. Some prospect investors are currently adopting a “wait & see” strategy. They want to see what remains standing after the virus has eliminated the “weakest links”, and curb the high valuations that we have been witnessing.
The Covid-19 crisis entails different challenges for different startups. For some, immediate cash flow issues might emerge, for other new opportunities. Both need to be managed accordingly. The good news is that there is plenty of money available for startups in the market. Investors are still actively looking for good opportunities. What you can do now as an “agile” entrepreneur, is show how you adapt to these changing circumstances.
What are the immediate actions to safeguard your current business operation?
- Focus on your key financial metrics including receivables, burn rate and runway in the new environment.
- Renegotiate payment terms with suppliers and “cash-rich” customers e.g. offer a discount if they pay faster. This entails both renegotiating what seemed like fixed expenses (e.g. rent, equipment) and reducing your variable expenses (bonuses, travel).
- Make use of …
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