The Founder's Ultimate Guide for Navigating Today's Crisis

A Thought Leader Guest Post from First Round:

The Founder's Field Guide for Navigating This Crisis — Advice from Recession-Era Leaders, Investors and CEOs Currently at the Helm

Leading a startup has always been challenging, even under the best conditions.

Founders need to quickly master a tremendous range of skills, from building a fantastic product and nailing go-to-market efforts to raising money and managing a board, all while figuring out hiring, culture and compensation.

Starting a company is also a lonely endeavor, one that forces founders to make difficult decisions every day with imperfect information.

While triaging these challenges, eventually every founder runs headfirst into a problem they haven’t seen before, the kind that leaves them unsure of where to start.

Today, we’re decidedly not operating in the best of conditions. With a future that’s more cloudy than clear, the dynamics founders face are magnified many times over and playing out simultaneously — at warp speed. Whatever tactics and strategies were working in January 2020, chances are they’re not as effective now.

These increasingly unmooring circumstances are the ultimate test of a leader’s resilience. In our experience, the best safety net is the wisdom of the community and the experience of fellow entrepreneurs. As we’ve been helping the founders we’ve backed plot out their careful next steps over the last few weeks, we've been trying to weave together these supportive threads. Today, we’re ready to share that project more formally on the Review, with hopes that it will be helpful to the broader tech community.

There’s no shortage of content out there right now on how COVID-19 is affecting startups. But amid the explosion of writing on the pandemic and the advice we’ve all seen scattered across Twitter threads, Substack newsletters and Medium posts, we’ve found that there are still very few resources that dig deeply into the nitty-gritty “how” of leading and planning during this crisis.

Over the past several weeks, we’ve been fielding a wide array of questions from First Round-backed founders:

• How do we approach planning given COVID-19?

• What signals should we be watching before pulling the trigger on alternative spending plans?

• How will the bar for fundraising be different in 18-24 months compared to now?

• Are there any alternatives to a RIF while still decreasing burn?

• How do we market during these times?

As for the answers, we have our own takes, of course. Since our start in 2004, the First Round team has applied a long-range lens through every twist and turn in the market. Partners Josh Kopelman and Bill Trenchard were building companies in the early 2000s, and were on the investing and advising side in 2008, helping companies like Square and Uber navigate choppy waters as the economy recovered from the Great Recession. We firmly believe, however, that the best company-building advice doesn’t always come from venture capitalists. More often, it comes from the peers and practitioners — the ones who’ve either been in your shoes before or are shoulder-to-shoulder with you in the trenches right now.

That’s why we’ve attempted to crowdsource and curate the lessons we’ve come across for this guide. Some of the advice we share here will come from the First Round team, some of it from founders who’ve built in downturns before, and some from resources we've curated. We’ve done original interviews, culled from previously-unpublished First Round Community guides and surveyed founders on how they’re planning to weather the storm. As ever, we’ll be highlighting what we find important, overlooked or counterintuitive.

We appear to be in the early innings, so there are no perfect answers or fully-baked playbooks here. But by sharing initial thinking, talking about the challenges everyone is facing and harnessing the helpful advice floating around in private channels, we hope to help you shape — and relentlessly refine — your response as the situation on the ground continues to change quickly.

We’re thankful to every startup leader who took the time to generously share their hard-won wisdom — particularly those who have previous experience building in the dot-com era and the Great Recession. Although we’re living in unprecedented times and every path is unique, we’ve found that some lessons come in handy over and over again.

You’ll hear from many different voices in this guide, as we’ve purposefully attempted to curate a wide range of perspectives. The current founders, recession-era leaders and full-time investors who shared their thoughts don’t always agree with each other — and that’s intentional. It's more important than ever to take in different perspectives in search of the best advice for your company. From Zoom and Instacart to StubHub and OpenTable (and all of those startups caught somewhere between these extremes), it’s clear there isn’t a one-size-fits all answer for running a business these days.

We’ve organized this guide into eight parts, outlined below. Fair warning: While we’ve always had a penchant for long-form here on the Review, today’s effort is seriously long and perhaps not a read you can knock out over your morning coffee. Instead, we’re envisioning this as a resource to bookmark — one that you’ll hopefully return to over and over again as challenges crop up.

Use these links to navigate around it more easily:

Part 1: Making Sense of Macro Conditions and Market Signals

Part 2: The Case for Responding Quickly and Thinking Through Scenarios

Part 3: The Nuts & Bolts of Scenario Planning — Our 5-Step Framework and Template

Part 4: Broader Thoughts on Extending Your Runway

Part 5: How to Reduce Burn — Strategies for Cutting Costs

Part 6: How to Bring in More Capital — Tips for Putting More Fuel in the Tank

Part 7: Supporting Your Team and Leading Through a Crisis

Part 8: Ending on a High Note — The Upside and the Next Wave

Also, be sure to check out this hub of resources we put together in Notion. It rounds up all of the recommended reads we share below, as well as our brand-new scenario planning template and list of curated job resources (both for candidates who are actively looking and companies that are still hiring).

This guide was last updated on April 9, 2020. We wanted to get this resource into as many people’s hands as possible, so we’re leaving this free and available to all. But if you found it valuable, we’d appreciate it if you’d consider subscribing to the First Round Review newsletter for all the stories and advice still to come.

PART 1: MAKING SENSE OF MACRO CONDITIONS AND MARKET SIGNALS

Let’s take a look at the broader context founders are operating in — and the case for why they might need to adopt a more conservative stance.

1. Brush up on your history as you make your bet.

“Founders in their early 30s might have been in college during the Great Recession and everything’s been up and to the right ever since. So my first impulse is to make sure founders recognize that they are operating in a different environment than they were used to,” says Josh Kopelman, Founding Partner at First Round. “While there may be a fast recovery, I think it’s important to assess the probability of that occurring. If one was to look at the history of the largest recessions over the last 50 years, the average length is about 12 months. And that's not to recovery — that's just till we hit bottom. A quick recovery may be a possibility — but so is a long recession or even a depression. Know what you are betting your company on and force yourself to acknowledge it.”

His fellow partner at First Round, Bill Trenchard, agrees. “Those who haven't been through a recession before and are anticipating a quick recovery might be overlooking what happens when people stop spending money. When budgets start coming down and people start maximizing profit over growth, it might be unbelievably hard to sell your product,” he says.

“There are multiple feedback loops of small business destruction, which can destroy a huge percentage of the jobs in the country, which in turn might destroy consumer spending, which could drive the whole economy down. To get more specific, nearly 50% of jobs in this country are with small businesses. Many are not operating, and have less than 30 days of a cash buffer. Consumer spending drives our economy, and the historic unemployment levels we’re seeing could lead to a massive drop in consumer spending,” Trenchard says.

“But the only downturn many of today’s founders have experienced was in...

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