How Founders Save Their Startups
Are you prepared to do whatever it takes to save your sinking business? And, more importantly, would you know where and how to start bailing the business out?
Every company — no matter how big or how small, how new or how old — eventually hits rough seas , a point at which the money coming in is nowhere near enough to cover the money going out. We saw this over and over again as the economic damage from the pandemic accelerated quickly and broadly, dragging all kinds of companies underwater.
But it doesn’t take a once-in-a-lifetime global quarantine to cause a negative revenue trend. It can happen to an individual company at any time, for many reasons: changing economic conditions; sudden market shifts; competitive pressure; loss of a key employee, partner, or supplier; even technological advancement.
The causes can be numerous, and the cures are all unique to the cause. So where do you begin?
Been there, saved some, lost others
I’ve been through a number of the broader economic downturns. Obviously, I’ve run startups through the most recent COVID-related crisis, but also the Great Recession and the dot-com bust. I’ve withstood minor disasters that impacted either my industry, my field, or my markets. I’ve lost key employees at the wrong moments.
Furthermore, I’ve talked to better and more experienced entrepreneurs who have managed their companies through multiple crises, succeeded in most cases, and failed in others.
There are multiple ways to dive in and save a startup (or any company) from certain economic disaster.
The obvious answer is go get more money. But even for well-funded startups with deep-pocketed backers, going back to original investors and getting them to pony up more money means giving away more equity, and at a less attractive valuation. I’ve seen founding teams negotiate themselves right out of ownership before they realized that the equity left over wasn’t worth the effort they were now required to put in.
The problem with raising “bail money” is that you end up playing from even further behind. New money creates a…