Council Post: Is Your Startup Growing Rapidly During The Pandemic? Here’s How To Manage

Managing Partner of North America operations at Liquidity Capital, providers of unsecured, non-recourse, no dilution growth capital.

Amid Depression-era unemployment levels and high-profile corporate bankruptcies, the economic toll exacted by the coronavirus is mounting by the day. But the financial pain hasn’t been distributed equally: Tech firms like Zoom, whose videoconferencing platform spiked from 10 million daily users in December to more than 200 million in March, have seen business boom, and Amazon has announced plans to hire 175,000 new warehouse and delivery workers as demand for deliveries soars.

Overnight, sectors that had struggled to gain traction or had grown incrementally in recent years have experienced unprecedented growth. With nearly 80% of students globally impacted by school and university closures, ed-tech has boomed, and leaders like New York Gov. Andrew Cuomo predicted that distance-learning technology will assume a greater role in education even post-pandemic. 

Similarly, the coronavirus has marked a pivotal moment for telehealth, which was already slated to become a $16.7 billion market by 2025. In light of COVID-19, regulators have adjusted rules for telehealth services, accelerating adoption of remote care services. Demand for food deliveries and online gaming has also shattered records.

Whether you’re operating a surging startup in one of these sectors or in another area entirely, you’ve likely found that the sudden spike in activity has been a mixed blessing. To be sure, it’s a more fortunate fate than what has befallen shuttered startups and bankrupt businesses. But managing such abrupt change — and doing so in a way that supports sustainable long-term growth — is no easy feat. That’s what makes smart approaches to funding and hiring so critical in this climate.

Rethinking Your Startup’s Funding

With an expected decline in early-stage venture capital investments, it’s important you’re clear on where your company’s funding is coming from. Perhaps you’ll opt for traditional venture capital funding, or you can consider alternatives, such as revenue-based financing or trajectory-based financing.

You’ll have to decide which solution works best for your situation. For example, my company specializes in trajectory funding, so I’ve observed that trajectory financing is becoming the path utilized by some businesses during this period of economic uncertainty because it often creates value to both an equity round and allows for a larger trajectory funding line.

There are a number of factors to consider before determining what type of funding you’ll pursue, such as the stage of your startup or whether the investor’s goals align with yours. But once you do obtain funding, you’ll want to ensure you’re thinking strategically about how to use it during this time of uncertainty.

The key takeaway here is this: The hard look at expenses and management adjustments to allow a company to navigate these uncertain times is critical, but so is ensuring the lengthening of the company’s financial runway. Obviously both reducing costs and raising more capital should be explored, and in most cases, both are the best way forward.

Hiring Smart

Of course, achieving consistently strong performance depends on attracting and retaining top talent. With millions of people out of work, there’s no shortage of quality candidates to fill roles, but it’s essential to avoid rushing into hiring decisions you’ll later regret simply because your startup needs to ramp up capacity. Making the wrong hire can cost your business big. The recruiting, hiring and onboarding process — some estimate as much as $240,000 — all that will go down the drain if a new hire doesn’t work out.

Approach the hiring process with meticulous care. Now is not the time to simply wave off any doubts about a candidate. If you’re going to commit to a hire, do everything you can to make sure they’re a good fit for both the role and your company. Once you’ve brought a new hire aboard, set robust but manageable key performance indicators so that goals are clear and expectations are achievable.

In addition or as an alternative to bringing on new talent, you might also consider evaluating your existing talent and promoting from within the company. Hiring freelancers can also help your startup scale in a cost-effective way; should a freelancer prove him or herself an especially strong asset to the team, you always have the option of making a full-time employment offer.

Don’t be afraid to grow.

If you are lucky enough to find your company in a period of hyper-growth, don’t be afraid of the challenges that abrupt change is presenting. Lean into the opportunity and position your startup for sustained — and sustainable — growth, by choosing new hires and funding opportunities that can help your business soar.

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