In the bear market, a lot of startups face one of the most scary issues a company has ever to face: The Runway is getting really close. Your startup may have enough cash for 2-3 months at most. Your employees are asking for their salaries, your investors are getting too anxious about the future and what you have spent months or years building is going extinct soon… This crisis is what I call the natural selection of startups. This is the point of differentiation between the startups that will eventually fail and the startups that will go on to succeed. I have seen the brightest ideas crash and burn, and startups with basic ideas flourish and rise. As I always say, it is not about your idea but the execution behind it.
Let us go through a crisis framework that I would advise most startups to follow in order to use these times of crisis as a propulsion to later success.
Phase 0: Avoid It Like A Plague
This cannot be stressed enough. Most situations could be easily avoided before they even happen. In Poker forums, where players ask about what is the most optimal play in certain situations, the most frequent answer is “Fold pre”, which means folding the hand before entering the situation. If your startup wants to be a winner on the long run, you need to avoid a cash crunch like the plague. In the seed round, you managed to fund your startup for a runway of 12 months? Great, make it 18 months. Fight for your life before it is even in danger. Cut costs of your startup like a madman, fight with your landlord over 20 bucks rent, fire poor performers, email your hosting company to give you a discount, Use your neighbor’s landline and pretend they are your secretary (just a joke, but if you do that would be hilarious). When a bear market appears out of nowhere, and you have 1 or 2 months more in runway than all the competing startups, this will make a difference. While all other startups are fighting for their life, slowing up development and marketing, and firing key employees, your startup would be cruising and way ahead of anyone else.
Now, some reading this unfortunately reached the point of no return. If you are one of them, there is still hope, the rest of the framework is for you.
