New Skills for Startup Founders: Managing Crises

We’re in an era of massive political upheaval, information distribution, and economic and technological change. Just over the past few weeks, we’ve seen substantial market dislocations driven by COVID-19 and a shock to oil prices – macro factors well outside the scope of most startup founders’ views. For those running a company, leading your team and business through these events means calling on a broader range of skills than has been historically expected of – or necessary for – founders. 

In the midst of significant changes, founders must adapt management styles, expectations, and business goals, to keep companies alive and stakeholders happy. Increased unpredictability of external factors means founders and executive teams are adjusting decision timeframes, and our plans need to take into account things outside of our control. 

Even those of us who have been through the founding process before – and weathered previous dislocations, such as the recession over a decade ago – are trying to figure out how to process external factors, stay calm, and develop contingency plans. 

I’m always talking to other founders, CEOs, and company leaders — but especially during times of crisis.  Here are some valuable lessons I’ve learned in past endeavors and advice they’ve shared that are helping me at Vouch today. 

Your business context can change overnight 

Heraclitus wrote: “The only constant in life is change.” And now, more so than ever, that’s true for founders. Our businesses are constantly faced with unpredictable hurdles, especially in an increasingly globalized world. Some challenges are small, like delayed flights or managing a distributed team across time zones. Some are bigger, such as dealing logistical implications of the current COVID-19 crisis if one has a supply chain that’s been impacted by the pandemic -- let alone supporting your team if they or someone they know is very sick as a result of the disease. 

The human and financial impacts of COVID-19 have already been massive. February saw a $50 billion decrease in global exports ($5.8 billion in the U.S. alone). The China Manufacturing Purchasing Manager Index is at its lowest since 2004. VIX – a common measure of “fear” in the financial markets – was at a 12-year high on Monday, the highest it’s been since the fall of Lehman Brothers in 2008. Behemoths like Apple face huge manufacturing challenges, and Adidas lost 85% of Chinese business activity. Airlines are predicted to lose $113 billion. As the disease spreads in the U.S., Europe and other parts of the world, time will tell how much financial impact it will have – not to mention the many lives affected by this disease.

For many startups, the near-term impact has felt different – but the other shoe may well still drop: we’ve felt the ripple effects via trade show cancellations like Mobile World Congress and SXSW, which was cancelled for the first time in 34 years. These shows are crucial for networking with potential customers, partners, and investors. 

Short term, this means there will be a slow-down in activity. On a slightly longer horizon, as the economic repercussions ripple through the economy, some businesses may find themselves out of favor with investors – and/or facing serious demand destruction.

In the face of this turbulence, employees will rightly worry about their and their families’ wellness, and also be worried about business implications: about missed opportunities, lost work, and diminished potential. In moments like these, it’s crucial for leaders -- especially founders -- to take a clear-eyed view of how contextual changes will impact their business, and take steps to ameliorate this impact. Along the way, it’s critical to communicate actively with your team so they don’t lose confidence in you, or imagine things that may not be true.

Managing your team through change

One of the biggest mistakes I made as a leader in my last company was to be too outwardly positive when things weren’t going well. This made certain team-members feel like I was withholding information, or, perhaps worse, ignoring bad news and a need for changes. Learning from this, I now use our all-hands at Vouch to transparently share our view on what’s working, what’s not, and what risks we see on the horizon. 

Humans tend to have good “BS detectors” so it’s critical for you to be honest, even while you lay out plans and an optimistic vision of the future. It’s fine to say that in the short term things will be painful: to get worse before they get better. It’s also critical to express how you as a company are going to get through hard times. And, with this crisis as with any crisis management situation, be sure to make communications with your team and other stakeholders (i.e. your board) an important workstream, deserving of its own focus and energy.

Maintain your focus and mental health 

Approaching business with the expectation that “someone is always watching” (which they are, in the new era of higher expectations in business) creates massive pressure. And despite the fact that such focus at times is necessary to succeed, when it’s added to the potential for failure, financial burden, external factors, burnout, and the expectation of constant innovation, it means that founders’ largest challenge is often their own mental health. 

My advice is to focus on your own wellness. Building a start-up is a grueling affair – even when times are good. If you treat every action on your plate as a sprint, you won’t have the energy to deal with moments of difficulty and rapid change. Only 15% of male founders and 42% of female founders self-report as seeing a therapist. Therapy or not, commit to boundaries that protect sleep, exercise, and time with family and friends. And be sure you have an outlet, like a peer CEO group, EO or YPO forum, or a collection of thoughtful friends you can turn to when you need a sounding board.

Be clear and honest about what you know – and what you don’t. For insights critical to your business, surround yourself with domain experts, and who can help you think through options, trade-offs and constraints. Invest in resources that help you with these decisions, and fill the gaps in your knowledge. This will help you develop a more informed view of what’s likely to happen, and what’s possible, allowing you to narrow your focus and get the most leverage out of your time, without needing to make dramatic sacrifices. If you need help, seek it. 

Most importantly, be honest with yourself and with those you trust, within and outside of your business. There is nothing more exhausting than believing one thing and having to pretend the opposite – and in a time of uncertainty, it’s essential to save your energy for the unexpected decisions and changes that lie ahead.