I was ready to launch my startup pre-COVID-19: Now what?
By Susan Nethero and David Nethero, Managing Directors and Co-Founders of the Atlanta Chapter of Golden SeedsMay 28, 2020
For many eager founders who were gearing up to launch their businesses this year, many are left wondering if now is still a good time. Like many questions in entrepreneurship, there’s not a one-size-fits-all answer; instead it’s important to evaluate your business and the market before deciding whether now is still the time to launch.
This period of uncertainty requires entrepreneurs to hyper-focus on every aspect of their businesses to fully consider if now is still the right time to launch. One of the most important things to consider is to evaluate how COVID-19 has impacted your specific industry. As we all know by now, some industries have been affected far more than others. No matter how passionate an entrepreneur is about her idea, it is essential to evaluate what the demand will be when you go live. Is your industry open for business? And if so, will customers be willing to listen to your great idea? Focus on the potential demand for your product or services in the near- and medium-term, which means while the economy and the industry recover.
Some industries aren’t only surviving the pandemic – they’re thriving, which could be a good sign if that’s your industry. Telemedicine and telehealth companies are showing incredible promise and value during this time, as is any service that can be provided virtually or remotely. We’re also seeing an increase in wellness classes or services being offered virtually – from nutrition counseling to workouts.
Food delivery and delivery services in general are also doing quite well at the moment. Our daughter’s company, Garnish and Gather, is a hyper-local food delivery service in Atlanta that works exclusively with farmers in north Georgia to deliver groceries and meal kits. For those farmers who had been selling to restaurants, now they have a place to sell their crops and local families have farm-fresh meals and produce delivered directly to their homes.
At Golden Seeds, we’re also seeing educational companies thrive during this time. Golden Seeds-funded startup Little Passports creates award-winning subscription kits to help encourage kids’ passions for learning about the world. These are companies focused on providing learning opportunities for children that are instructional, or entertaining products, crafts, hobbies and language tools.
Even if you’re in an industry that’s doing well, consider if your potential customers will be willing to purchase your products or services. Now might not be the time to launch in certain industries, such as travel, that are down as much as 90% right now. It may also be prudent to delay an equity raise in certain industries until that industry turns the corner. By waiting, you could likely have more investor options and possibly better terms.
Are you ready to launch? COVID or no COVID?
It’s critical to evaluate your company’s viability through the lens of COVID-19, but it’s equally important to first evaluate the viability of your product or service even if there were no COVID. While many of us are hopeful for a swift recovery, certain perceptions may not go back to the way things were pre-COVID.
For all other businesses – not the ones who are either directly benefitting or directly impacted – which is likely most businesses, you have to take a hard look at your fundamentals. Every assumption of your business model should be reviewed and challenged. Be prepared to honestly answer the following questions:
- How unique is your product or service? How do you differentiate versus the competition? Do you have proof of its efficacy? What about the landscape – has it changed since COVID?
- Do you have a minimum viable product? You may have been ready to launch on all fronts before COVID, but now is the time to examine how the current situation may have altered near- and medium-term opportunities.
- Does the pricing you anticipated for your product or service still hold up in the new world? You may have previously carefully researched pricing, assessing the demand and the competition to arrive at your pricing, but you must now assume those assumptions have shifted.
- How long do you expect it will take to complete a sale? Has this changed since COVID? Under the best – and the worst – circumstances, how long will it take to generate traction? This is especially important if your industry has been hit hard by COVID; you must be realistic about revenue expectations.
- Are your assumptions about your supply chain still relevant? If you were going to rely on supply chain partners for delivering certain products for services, assess the health and viability of those companies in the reality of COVID.
Still ready to launch? Learn your options
Knowing the headwinds ahead of you, if you’re still determined to launch, you have options. It’s important to think outside the box and be creative in ways that you fundraise, and, if you have a product or service ready to launch, distribute.
When it comes to fundraising, first examine how much money you really need. If you pursue raising outside capital, determine if you could make progress with a smaller round than you initially planned. Perhaps you can stage the launch or bootstrap the launch, or consider raising debt rather than equity. Have you tapped into your personal networks? Friends or family could be a way to gain capital to allow you to make some progress before you go for outside capital.
Research available grants or loans for which you may be eligible, including what’s available through the CARES Loan Program. There is more money available today through low-interest, government-backed loans than ever before.
Crowdsourcing through networks like Kickstarter or Indiegogo can be a great way to fundraise while generating sales and getting valuable feedback from customers. Generally, crowdfunding is a good option for those launching a product rather than a B2B service or SaaS product. If you have a customer-oriented, tangible product, crowdfunding could be an excellent avenue for you.
Think about how you can work with suppliers/partners to support your cash flow. When we were running Intimacy (a bra-fitting company founded by Susan), we realized in 2001 that we had much of our cash tied up in inventory. We found ourselves in the post 9/11 recession. We had to consider inventive ways to grow our top-line and produce higher sales while owning less inventory. To reduce inventory, we developed innovative models where we purchased smaller quantities more frequently netting an increase in cashflow. We found that a great option for this increased cashflow was to work with our suppliers on payment terms, figuring that it was in their best interests if we succeeded. In our case, we offered to make earlier-than-usual payments for inventory, for a hefty discount. We continued this even after the recovery as an inventive way to free up cash and increase margins. Is there something similar you could offer your suppliers to help free up cash today?
Lastly, but perhaps most importantly, seek out people or organizations who can give you valuable advice and insights. As angel investors, we have often met entrepreneurs who weren’t a right fit for us to invest in their companies, but we were still happy to connect them with the right people who might be a better fit for them.
At Golden Seeds, we also host Office Hours, now completely virtually, that gives entrepreneurs access to valuable tools and resources for raising capital, as well as free, 15-minute one-on-one break-out sessions with investors. We host them for Atlanta-area entrepreneurs, but Golden Seeds chapters across the country host Office Hours in Arizona, Boston, Dallas, Houston, Miami, New Jersey, New York, San Francisco and Silicon Valley.
If now is still the time to launch, know there are going to be some seriously strong headwinds with which to contend. Entrepreneurs, in general, need to be able to articulate their startups’ value, and this has never been more important than it is now.