In Business Environment

Sequoia on impact of Coronavirus

Partners of Sequoia Capital have put out a note to their investee companies suggesting that coronavirus is the black swan of 2020, and recommending that they ensure the health of their businesses while dealing with potential consequences of the spreading effects of the virus. Here is a replication of the note.

Having weathered every business downturn for nearly fifty years, we’ve learned an important lesson — nobody ever regrets making fast and decisive adjustments to changing circumstances. In downturns, revenue and cash levels always fall faster than expenses. In some ways, business mirrors biology. As Darwin surmised, those who survive “are not the strongest or the most intelligent, but the most adaptable to change.”

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  • Cash runway: Have you made contingency plans? Where could you trim expenses without fundamentally hurting the business?
  • Fundraising: What would you do if fundraising on attractive terms proves difficult in 2020 and 2021? Could you turn a challenging situation into an opportunity to set yourself up for enduring success?
  • Sales forecasts: Deals that seemed certain may not close. The key is to not be caught flat-footed.
  • Headcount: Given all of the above stress points on your finances, this might be a time to evaluate critically whether you can do more with less and raise productivity
  • Capital spending: Until you have charted a course to financial independence, examine whether your capital spending plans are sensible in a more uncertain environment. Perhaps there is no reason to change plans and, for all you know, changing circumstances may even present opportunities to accelerate. But these are decisions that should be deliberate

False optimism can easily lead you astray and prevent you from making contingency plans or taking bold action. Avoid this trap by being clinically realistic and acting decisively as circumstances change. Demonstrate the leadership your team needs during this stressful time.

Sequoia

Roelof Botha says in the clip “I think you need to continue to plan to go forward. Chaos creates opportunity. It creates risk, but it also creates opportunity. It may be a time to lean in and take advantage of opportunities”

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