#9B – Impact of COVID-19 in the World, Venture Capital and Start-ups

We split this episode into two parts: in this, the second and final part (9B), we discuss the implications of COVID-19 in the Venture Capital and the Start-up ecosystems. We share our no-BS view on how easy/how difficult it will be to fundraise, depending on the space you are in, on what will likely change when the “new normal” comes into play and what to focus on in order to make your business survive this, the biggest and most ruthless of all storms (recorded on April 16th).


  • Introduction (01:27)
  • Section 1 – Impact on Venture Capital firms (01:44)
  • Section 2 – Impact on Start-ups (14:37)
  • Section 3 – Boards and Governance (31:02)
  • Conclusion (38:23)
Our co-hosts:
  • Bertrand Schmitt, Tech Entrepreneur, co-founder and Chairman at App Annie, @bschmitt
  • Nuno Goncalves Pedro, Investor, co-Founder and Managing Partner of Strive Capital, @ngpedro
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Full transcription: may contain unintentionally confusing, inaccurate and/or amusing transcription errors

Intro (01:24)

Nuno: In this, the 2nd part of episode 9, episode 9B, we will be discussing the impact of COVID-19 on VC firms and startups. For further reference, listen to the first part of this episode, episode 9A. Let’s start today with Venture Capital firms.

Section 1 – Impact on Venture Capital firms (01:44)

I recently shared with a number of you, on Twitter and a couple of other social networks my own views on what’s happening in venture capital. And let’s start from the bottom up.

Let’s start with the individual impact. I know it’s shocking, but we, VCs are people, and therefore as people, we have the same issues as everyone else. When we go into shelter in place, we might have families that we need to take care of. We might have kids that we need to take care of, spouses, and we need to articulate complexities.

Like, for example, all of a sudden, if you have two kids, if you have a spouse that’s also working, you might have three or four zoom sessions at the same time. And you know, houses are not of unlimited space. So obviously people need to articulate. I was seeing a social media post from a well known general partner saying that he was taking his calls in his car because that seemed to be the only real quiet space in his house.

So again, we as individuals are dealing with the same complexities as any other individual. And one needs to take that into account. What that implies is, there’s a lag. You have a latency right now, if you’re a company fundraising, you have to deal with this latency. The first step to that latency is what I just talked about.

It’s the fact that I as an individual, as a venture capitalist, need to deal with this new reality and this new complexity. I might not be more productive immediately. It might take me a while to get back to my productivity. 

The second level of latency that I have to deal with, if I again, am a startup fundraising, and trying to fundraise from a venture capital firm, is the fact that VC firms have portfolio companies, and portfolio companies in some cases right now are going through complex times.

And the way I normally categorize portfolio companies for a venture capital firm is you either have counter cyclical portfolio companies or cyclical portfolio companies. If they’re cyclical, they’re aligned with the current economic cycle we’re in. If they’re counter-cyclical, they’re not.

If they’re counter-cyclical at this stage, you’re probably doing fine, your companies are probably doing well. If the companies are cyclical, your portfolio companies are normally either positively correlated or negatively correlated to the cycle, and if they’re positively correlated meaning they’re doing really well in the current cycle, we’re in, basically you have issues like capacity. How do I hire faster? How do I scale? I’m having issues around regulation that I need to sort out, but normally it’s about hyper growth. Many would say that’s a great issue to have. Yes it is, but it also creates other issues in terms of capacity supply and how you, for example, as a board director of some of these startups need to deal with them.

Then there’s the negatively correlated, the companies that are just getting killed. If you’re in the travel space, if you’re in the restaurant space, if you’re in the hotel space. How are you dealing with this? And those companies need particular attention from, again, their investors at this stage. Some of them might have four months runway, five months runway. So how do you deal with that? 

So again, that’s how VC firms now are dealing with this. Those are the latencies that are subject to. 

On the other side of latency, you have to take into account that many VC firms are raising money, or probably in the process of raising their next fund, or their first fund in some cases. 

When this happened, those VC firms are going to have difficulty doing what we call a close of getting capital commitments from their own investors so that they can start investing in companies. Now, there are venture capital firms that are deploying capital, that are closing funds right now.

We just heard Lightspeed closed another record fund. And so those are deploying capital and are in the market. But again, they need to deal with their limited partner base. They need to deal with their own investors. And it might be the case that some of their own investors right now are having their difficulties.

It’s not unheard of that family offices, that even some institutional investors in VC firms at some point in time have too much exposure and might have low liquidity. So if I’m a venture capital firm and I need cash to invest in a company, and I do what I call a capital call, it might be that some of my investors actually don’t have that cash to give me, and that generates its own issues. 

So when you’re looking at VC impact, the VC impact comes at many levels, from the very individual person level, all the way to VCs’ investors, all the way to the issues that they need to deal with their existing portfolio, et cetera.

So at this stage, VC impact is very significant coming out of COVID 

Bertrand: Yes Nuno, I totally agree with all these points. I think it’s good to provide that big picture view of what’s happening on the VC side, and yes VCs are human beings as well, and they have to go through that, like you are on the other side, as an entrepreneur for instance. So it’s key to understand, who you are working with, and what’s their situation.

I think another piece to think about, both from a VC perspective and  entrepreneur perspective, I’ve seen a lot of people comparing with 2008. 2008 , yes, that was a big crisis. So first after what we discussed, it’s pretty clear 2008 is probably the best case, it’s probably going to be worse.

But that’s more than that. It’s not just financial, this is a health crisis. People don’t know, they might be dealing with their parents in very bad shape, that are at risk of getting this type of illness. They cannot meet, GPs cannot meet LPs, general partners cannot meet limited partners physically. Maybe you might close with people you know very well, but people you don’t know very well, how are you going to even pitch them for your fund? 2008, it was not easy, but at least you could physically pitch, now you cannot physically pitch.

And the same is true with entrepreneurs with VCs. In the short term, I see a lot of VCs saying, ” business open as usual.” Yeah, but if you where not used as a VC to work remotely, I don’t think you are open as business as usual. You are already changing everything how you operated, so some VCs are used to operate remotely, but they are rare. Nearly everybody else was not used to that, required in-person partner meeting, in-person meetings, and this is not there anymore. So business as usual, like some are claiming, I have a lot of trouble to believe, and by your description, it’s pretty clear that it’s a near mathematical impossibility.

Of course, some are closing deals because they knew each other for a while. Deals don’t happen in a few weeks usually, you have met people before, so this kind of stuff is going to work out for the coming weeks, but at some point, we need to go to the next stage, which is, “Hey, we have not met, but we can still not meet physically face-to-face, how do we go from there?”  and I think that will create change in process. 

And to be clear, it’s not just VCs and startups obviously, if you are in any sales situation, that’s the same question. Some new etiquettes will be put in place, that yes, you can do some deals remotely, and it’s okay, but right now, we don’t know yet how some will adjust to that new reality, and that’s part of your analysis as an entrepreneur, as a VC, on how to deal with that, and potentially delay some action.

I would personally strongly suggest to wait a bit before fundraising, and do everything to not need it, so that you can get a bit of sense of where the world is going,  and how to position your business the right way.

Nuno: And as it is always the case in times of great volatility, there’s also great opportunities, and so VCs that are aggressive, that have capital to deploy. That want to be aggressive going to the market, that want to build the brand, NFX actually just announced nine days or less to go from first conversation to commitment to start ups. Smaller checks, but still, that’s an interesting thing. 

This is a great time to be in the market. It’s a great time to invest. It’s a great time to have capital to deploy if you are a venture capital firm. A lot of companies that need capital right now or that are fundraising right now, are companies that are going to withstand the test of time.

And so being in the market at this stage for me is very positive. A couple of important things to take into account. One, companies that would stand the complexity of almost running out of cash, but still survive, make for incredibly resilient companies. We talked about them around 2008/2009 and then subsequent crisis as cockroach companies.

These companies have the ability to withstand the test of time, and so that matters. If we look back in time, I know a lot of VCs are now going back to this. Some of the biggest, biggest companies in the world right now in tech were created around crises. They were created around moments that were not easy.

Google, the BAT, almost all the three of BAT in China were created around times of crisis. We’ve had the case of Uber and Airbnb around, again, the last crisis as well. I know everyone’s going back to it, but again, I as a venture capitalist, this is the time where you shine or you go away. If you think that basically there’s a lot of opportunities, this is the time where you can differentiate yourself in the market and go after the really great deals.

Bertrand: I think, to your point, a lot of talk has been around the tourist VC, or the tourist entrepreneur. What are people meaning when they talk about that?  They mean about the guys who are there when it’s easy, but disappear when it’s hard. So I think that would be something we’ll see over the coming 12 months, is who is a real entrepreneur who tries to make it even when it’s hard, even when there’s little money, when it’s difficult, when it’s difficult not just to fundraise, but to sell, to get to your clients.  And the same on the VC side, who was doing it when it was just easy to get entrepreneurs coming in,  and your brand was good enough.

I think some stuff might change, because there will be competition from new firms, there would be some new business approach that might not make you comfortable. So everyone will need to adjust, it will be an interesting time. 

I can just say that, as a VC big question is around what will be your strategy right now. Are you going to dramatically change your investment profile? I’m not thinking so much in term of stage, I guess not, but in term of industries. Are you going now all in: remote work, healthcare. What’s your take Nuno on that? 

Nuno: It’s very interesting ,because we always say that VCs look at product, market, team. And product is product, technology is technology. There aren’t necessarily any huge shifts happening right now in the market. Teams, there’s obviously volatility in people and individuals, but certainly nothing should change it.

But markets, it’s just gone upside down. If you were basically looking at travel space as one of your core thesis areas. Are you going to stick to it for the rest of your fund or not? Are you going to bet that things are going to go back to normal? Are you going to basically push some of your portfolio companies to think about pivoting? Are you going to continue even investing in that space? 

And when we’re looking at markets right now, in the current rules that I’m having as a venture capitalist, it’s very interesting cause things that literally four or five months ago looked really appealing  right now don’t look appealing at all.

And if we go back to some of the conversations we have, you can’t beat a bad market. And now the key question is: is this a bad market that’s going to stay? Is this a bad market that’s going to be a bad market over the next five to 10 years? Or is this going to be a bad market as you mentioned earlier, over the next 12 to 18 months when we have vaccines and recovery and all of that. And the interesting discussion right now is if it’s just going to be a bad, short term market, would I still invest in that company or not? Because that company is going to go through hell for a while and so would I still do it?

Would I bet on resilience, would I bet that they will get much stronger at the end and still win it. So I think market is just gone totally mad. Anyone that was doing any forecasting, any research teams or any research that had been done for thesis building in venture capital firms as just been thrown out of the window because it’s just not valid anymore.

They’re just subsectors right now that are definitely not going to be very investible in the short term, or you’re going to have to make a huge bet in the long term that these are markets that you want to be in.

Bertrand: Yes that’s a fair point, and it’s not really a startup obviously, but when you think about a Boeing,  or an Airbus, there are fair questions about what their future look like in a world with less travel, no one buys new planes. That’s the reality. 

So if we go on the startup side, that’s a similar question, as you say, are some sectors becoming completely un-investable not just in the coming 12 to 18 months, but on the longer run. And I’ve heard, personally, about some startups in this space that have laid more than 90% of the business already, and basically are preparing for some level of hibernation.

To say you know what? Maybe you are going to be back up again in 12 months from now.  But there is only so much you can pivot, if you talk about pivoting inside travel space for instance,  versus pivoting outside, it’s probably very hard.

Nuno: If you look for example, at the event space. If you are embedded in the ecosystem of the event space, I mean, that would need to be the mother of all pivots. What, what do you do? We just heard news apparently by Facebook or certainly from Mark Zuckerberg, that they were thinking of actually delaying any events with 50 people or more to mid 2021. Right? Maybe they’d know something we don’t . Maybe it’s aligned with the timeline that you were sharing with us of 12 to 18 months.  Just think about that. There’s no way you can resist that market. You just can’t stay around until it pops up. You need to make revenues. You need to have customers.

Things need to happen until the market propels itself. If there is no momentum, you shouldn’t be there.  We talked about the notion of catching waves in the past when we’ve talked about momentum. This is not even flat  sea. This is like, it’s the worst of waves. It’s like the opposite wave. It’s like the wind is all against you . 


Section 2 – Impact on Start-ups (14:37)

Bertrand: So Nuno, let’s talk about the startup impact. I think, for startups in Europe and the US, ground zero really probably   was on March 5, when Sequoia sent this email : “Coronavirus, the Black Swan of 2020”. And believe it or not … it was not so long ago, it’s five, six weeks ago.  I know that, myself, I was at that time wondering why not everyone is waking up,  but at least, thanks to Sequoia, it was brought up to the attention of every startup CEO.

Nuno: And just to tell you that I think this time around, they were actually a bit late to the party. Exactly to your point. Last time, I think they were ahead and they actually anticipated the crisis. This time, they were after in some ways a little bit, maybe I’d say three, four weeks too late. I was hearing some VCs that were a little bit cognizant saying, this is going to be implosion this year, this is our black Swan. Probably in early February. I can’t count myself amongst those, but I certainly saw some people saying that.

Bertrand: Yes, but they might have been the first one to go public about it, and it’s one thing to talk privately, it’s another thing to go public, but yes I agree. I remember myself sending that article to a lot of entrepreneurs I knew, and used that as a way to say, “Hey, guys, just stop, stop and think, because shit is hitting the fan, and there is no other way around it.” 

So what do they talk about in this article? 

You have to plan for a drop in business activity, you have to expect supply chain disruption, you have to expect change in travel, cancelled meetings.  

And where do you go from there? Cash runway, cash is king. I think we go back to that famous phrase “cash is king”.   Expecting a very difficult and tough fundraising environment, because as you said, VCs it’s not just their money, it’s money coming from LPs, in many cases, at every new investment.

So you don’t want to be asking money from LPs when it’s not a great time for LPs.  So even VCs will get some impact.  

From there, you have to readjust the sales forecast,  and I found some very, nice matrix about that, we can talk in a few minutes. 

Marketing, obviously everything changed in marketing. How do you do events? We talked about events just a few minutes ago, and if I take Mobile Work Congress, that you and I know very well, have been in many, many years, for the past 20 years, you were at GSM association, I don’t know if they will have a successful 2021.

 Personally, as a business, I would not put a dollar to get a booth at Mobile Work Congress 2021. I have no clue if it will work out, and I’m already angry at them because I paid for the 2020 edition, and I didn’t get any result from it. So it would be very interesting what’s happening to events that have disappeared, not just for a year, but looks like most probable for two years.

What’s your take Nuno on that, by the way?   

Nuno: Everything you said absolutely makes sense. The way we’re doing sales today, the way we’re doing marketing today in particular in the B2B environment. It needs to shift, certainly in the short term, but I do think there will be a way to change it in the longer term as well. And in some ways, if we look back at the advent of inside sales, inside sales is not, something that is that old.

You know, the notion that you can ramp up inside sales, be aggressive on outbound is relatively recent. I do believe that we’re going to have more and more, sales and marketing done in innovative ways. The companies that are able to innovate on these functions actually will have an unfair advantage going forward.

Again, in particular in the B2B space. 

The opportunities in B2C, and direct to consumer are immense. People have maybe more fragmented attention span right now, because they have to deal with their kids at home, et cetera. But at the same time, there’s a lot more reach. So again, it’s like everything in life.

If you’re a startup right now, my advice is similar to yours. You need to sit down, to think through your scenarios. 

You need to start from a, what I call the bare bones scenario: which is what’s your runway? What’s your burn rate? Does your runway safely get you to a point where you think you can raise again, yes or no?

Likely the answer’s no. If it does not. What would be the most extreme scenario that I could foresee for my company? How would I cut my operations to at least stay alive? I’ve heard a lot of venture capitalists talking about this as a time of opportunity. I believe it is. I believe this is a time of opportunity, but there’s only opportunity if you survive.

The first thing is survive.  Obviously we’re the time of Easter, where maybe resurrection, et cetera, is part of the season. But it’s really literally, can you survive? 

And I’ve had this discussion particular with companies that are what I mentioned before, cyclical and negatively correlated. So they’re very badly impacted by the current situation that we’re in. And the first thing I asked them is, what’s your cut to the bone scenario? And the second question is, when would you move to that scenario? When would you move to that plan? So this is no longer just a contingency plan, but when would you move to it?

And it’s shocking to me that there are still entrepreneurs that aren’t ready to have that discussion. And we’re in April and we still have at least one month of shelter in place. The world will take a long time to recover, so why are people not going to that? Now, like everything in life, you have several levers to scale, right?

One lever is obviously cutting costs and reducing operations and keeping it to the bare minimum, which is normally where we go to in the first instance with furloughs or layoffs,  whatever needs to be done. 

But there’s also interesting opportunities on the top line side. And this is a time where you need to think about, okay, maybe I’m not making much money, but I can make money. And so if I can make money, because I know I can, I need to start making it right now. As you said, it’s “Cash is King”. 

Then you need to go back to your investors. We talked about venture capital firms before and ask them, how willing are you to bridge me through this period of time? One of the first conversations you actually need to have, in particular if you are venture capital backed, or institutionally backed by investors in the space, is go back to your investors and ask them, are you going to bridge me or not, and how much could you bridge me on? And have this really difficult discussion one-on-one with each of your investors? Because that gives you a buffer. If you don’t have that buffer, then you just have, as I said before, runway and a burn rate. That’s it. That’s the only thing you have and that’s what you need to deal with.

Bertrand: Yes, I think makes sense, Nuno, and first, I think you have to assess what’s the health of your business.  We found this very interesting study from, Revenue Collective,  it’s a group of more than 1700 sales professional at some of the fastest growing companies, and they run a survey to ask their members, what do they see? 

So what are they saying is that 96%, 96% have seen an impact on their business.  72% have seen adjusted revenue targets and forecast. Only 1% have seen a benefit, in that situation, and are increasing their forecast. Only 1%. So we always talk about the one in  good shape, now we have a number. It’s 1% doing better than usual. 61% are expecting a decline in Q2 bookings, compared to Q1.  About 15% will see an increase actually. That’s good news. 62% will have a change in quota in 2020. Sales leaders have reduced typically quota anywhere between 10 to 50%. Five zero.

80% have paused hiring, and a similar number have reduced budget.  Business travel, new hires, new software purchase, top categories of budget reductions. I guess, except if you don’t have Zoom yet. About 45% of respondents have seen higher churn, and a majority of the revenue leaders believe the impact will persist through 2020. So they see the impact of COVID-19 persisting through 2020.  

Nuno: And just to clarify, Bertrand, just through this year, 2020 or next year, 2021?

Bertrand: Will persist through 2020 so basically until end of year they see a really negative impact. So it might get better somewhat in Q4 versus Q2, but it will still be, not the Q4 you were planning to do in the first place.

So I think that’s key, because once you start to realize that, on one side,  your existing investors, or new investors, yes, they might claim to be open as usual, but they probably are not. On the sell side, you’ll probably make less money. So that means that you have to make some conclusion, you have to make some hard decision. 

How do you reduce cost so that you manage your cash, and ideally, so that you extend your runway. I’ve heard a lot of startups that are focused on extending indefinitely runway, from the perspective of, “We cannot afford to lose money, because we cannot depend on potentially a financing that might come or not come. 

Nuno: And for me, the interesting piece is, I think of this from the perspective of the venture capitalists, and this framework might be helpful for some entrepreneurs that are trying to raise money or thinking about raising money right now. 

Number one, if you are, again, cyclical, positively correlated. I, as a VC, am mostly looking at, is this positive correlation that you have right now. Let’s say you’re in the gaming space and you’re seeing your numbers go through the roof because everyone’s playing your games, or your platform’s doing incredibly well. The key question the VCs will have is, is this sustainable through time or is this just peak condition right now? It will come down as people go out of their places and go back into a sort of normal life or this new normal that we’ve talked about. 

Number two, you are negatively correlated. I wouldn’t try to raise, or I would try to raise from very nonobvious sources. Certainly not classic VCs. I would try to raise from,  friends and family, high net worth individuals, family offices, strategics if they have the capital.

And I would go through everything under the sun to really reduce my burn to a point where I think I could be doing a manageable company and live to fight another day. Literally live to fight another day. And if you are counter cyclical, I think the question that most VCs will have about you is, are you really counter cyclical or are you actually going to have a correlation at some point?

Are you going to fit into some part of the cycle or not? So those are the three questions I think most entrepreneurs need to take into account when talking to VCs. If you’re a hot company, whichever of these three cases you come under, and if you can raise money, raise money right now. If you can raise money, raise the money.

I was talking to an entrepreneur the other day, she was raising $500K because she knew she wanted to be lean, and I was like, when are you going to raise again? End of the year. Advice is very simple, can you raise more than $500K, you seem to have a lot of momentum. She said, yes. Then go and raise. Three days later she’d raised $950K, I think she’s raised a $1.5 million note in the end.

You just go and raise and the beauty of this is if you have capital, if you have cash. If you are thinking through what’s happening to your business and product going forward, obviously you shouldn’t be just in Lala land and not figuring out that we are in the middle of a dramatic change, in the world that we live in.

But let’s say that you are having a business that is working well. You have cash in the bank. This is a great time to have cash in the bank. The same thing I said about VCs is true for startups. There are people in the market that have been laid off that are top talent. These people are in the market right now.

It’s never been, and it will never be as easy, for example, to hire in the Bay area, solid engineering talent as it is right now. I can bet you. So right now, go to the market and get the best talents you can get. Again, if your business makes sense, if you have right momentum, if you have cash in the bank, this is a great opportunity and this is the difference between having an incredible ramp coming out of this into 2021 or actually having flattened out your growth.

Bertrand: Yes and to that question , in term of hiring, I’ve seen a lot of companies that are wondering a few things. One is, if they’re not remote work first companies, they discover it’s not that easy to hire, to select, to find,  to even onboard people in this time and days.

So that’s one issue, one risk, but two, you talk about engineers in the Bay are great, and available now, and cheap, quote unquote. The reality is that, in that situation, I see more and more companies that are wondering, “Hey, now might be the time I go remote first. I get rid of my shell, I get rid of how I used to work, how I used to think, and there are great engineers in Utah, in Austin, in other places, where basically it would be way cheaper, and they would be so excited to join my company, which might not have been an opportunity before for them.”

So I would urge a lot of entrepreneurs to start to rethink their business model and assumption, so that they build a business, not just for the coming few weeks, but really for the months ahead. And the months ahead,  might actually force you to work remotely, at least in the software and internet industries. So I think    that’s stuff to keep in mind, that’s a way to take advantage of that situation.

Nuno: As I mentioned before at the nature of all of this, there are individuals, and I just saw something actually from Pete Flint for NFX and obviously cofounder of Trulia, saying that when you actually have to go through layoffs. It is often the case that you as a CEO, feel closer to the people that you’re laying off.

And you obviously want to spend time with those people because you feel guilty for laying those people off or furloughing , and his point was a little bit like you need to really focus on your “stay” team, on the team that is going to stay, and motivating the team that’s going to stay. And I know this is an abrupt way of looking at it.

But it is a very fair statement. You need to focus on the team that stays with you, that’s going to go through the next stage of your business after the layoffs. You need to motivate those people. You need to make sure that they understand that the layoffs were an unavoidable, that you have a plan to hopefully make sure that this won’t happen again or certainly not in the dimension that it’s happening right now.

But I go back to the nature of individual and I talked to a lot of entrepreneurs. I coach a few entrepreneurs, advise on top of actually being an investor. And I always focus on that. You need to be well as an individual, if you’re the CEO of the company, because this is going to be the toughest time.

This is the toughest time. It’s going to be the make-or-break of your tenure as a CEO.  And so you need to be well with yourself. And this is a time of focusing also on your wellbeing and the ability to deal with decisions and to be cool about them. It also needs to be the time where you surround yourself with people, not only internally in your team, but also potentially in your board, potentially in your investor list, that can actually help you make some of these difficult decisions. This is the time where you need to actually be the most relaxed possible self, and it’s probably the most difficult time to be the most relaxed self in.

So that is my advice to entrepreneurs. Also think through your stuff. If you’re doing: “I’m not sleeping. I can’t sleep.” If you’re not forcing yourself to at least get one good night’s sleep every once in awhile, you’re not going to be making the right decisions for sure. So again, think about your wellbeing as part of the same thing as the wellbeing of your company and how you’re dealing with it going forward.

Bertrand: Yes and you talk about layoffs, and that’s an unfortunate reality of what’s   happening, we saw that coming, the numbers in the US, I don’t think have ever been so bad, for sure they have never been so bad so fast ever. And so far, it has mostly touched, different part of the economy, from restaurant, to bars, to the gig economy.

Now, clearly we are going to enter a stage where, so-called white collars  are going to get impacted and that will be tough time for them, because the ability to find something quickly again will be very limited for a few months. It’s not the usual: loose a job, you look around, you find other opportunities to replace relatively quickly, at least in economies like the US, that are very flexible . It will be tough on them. So I think that, when you do that, you might have no choice. I mean, the survival of your company is first, but you have to do it the right way, in term of how you communicate, how you are compassionate, how you try to optimize, for them their situations, so that the change is not too abrupt.

So I think you want to be careful, because I agree that you have to focus on your “stay” employees, but people who stay, they always see how you treat people who left, who were forced to leave. So I think it’s critical not to forget about that. One, for just good human reason, you want to treat, people with humanity, but two, because people will look how you dealt with the others, and know that, first there is a risk that more is to come, that’s never what you want, but it’s difficult to know in advance with such a situation, and they will definitely not react the same, depending on how you treated people who had to leave.

 Nuno: And I fully agree with everything you said. You can’t be callous either at this time, but in some ways there is a little bit of a self victimization by some entrepreneurs that I see in the market saying it’s all my fault. This is falling down. I need to take all the burden without the realization that if they take all the burden, they can’t be well with themselves and they therefore cannot make the right decisions also for the future of their company.

So, not that I’m saying you need to be with egotistical or selfish, but you do need to take care of yourself. You do need to make sure that you’re going to be in a good position to make the difficult decisions and to move the business forward. 


Section 3 – Boards and Governance (31:02)

Bertrand: So we have another interesting topic  to finish. It’s, the board, the role of boards, in such difficult situation.  A few points to think about : boards are this interesting mix  of VCs, entrepreneurs, execs, advisers, independent board members.  And so at some point, all come to the board: the biggest decisions have to be approved by the board, you need to make a case for it as a CEO,  you need to get agreement, there will be different perspective, different views.

So what’s a role of a board, what are the tough question you should ask as a board. First, it’s around your leadership, do you have the right team in place, that’s obviously the biggest question, because if you don’t, that’s a big trouble in this difficult period.

Two, do the team has the right mandate? All the plans have exploded right now. So you need to make sure that we are changing and adjusting, the plans, the targets, even the approach. Do we move from quarterly meetings to monthly meetings, to weekly meetings. A lot of things should be changing. How, as a board, do you support effectively, management? That’s really  a big question, and you probably need to change your habits. A lot of boards tried to do a lot of things in person, obviously it’s difficult these days.  Do we have the right operation, do we operate effectively and  last point, maybe a bit more hopeful is, how do we prepare for what’s next? How do we, in a way, take advantage of this situation? How do we create new opportunities for the business? How do we work, differently?

One thing I was relatively surprised to hear, for instance, is that right now, a lot of big Fortune 500 companies are not looking at that situation of shelter in place as a one off event, but are more considering very, very seriously remote work, as a core part of their business going forward, because they realize they have no clue when it would be really fully over, it could come back, it has shown that there were risks in the way they run their business, and basically, some are definitely looking for remote work, not just for the coming weeks, but are investing for the coming months, and if not years actually right  

Nuno: I agree with all the questions, I think it’s a very interesting and valid framework. I would just say it’s missing for me, the number one question and the number one question I would ask immediately as a board member or as part of a board of directors is how will we survive? And it’s like need to look at cash position, need to look at pipeline, need to look at what’s happening to our business right now.

And this is not about strategy. It’s not about tactics. It’s literally nitty-gritty numbers, in the moment what’s happening right now. And the call needs to be made of, okay, we think we’re going to weather the storm, so we need to prepare for the future. We need to be in a good position to go for it, or we might not, and therefore, what do we absolutely need to do to survive?

That’s for me. Question number one. Any board of directors,  Any board members should have that at the top of their mind. 

And from there, you have all the other discussions, right? If the company’s in great health and it’s actually growing, that’s fantastic. As I mentioned before, there might be issues in scaling up operations. So there might be issues that are more related to hypergrowth than anything else. If the companies, again in a counter cyclical movement. Fantastic as well. We can focus about the future. We can see if there’s any spillage effects by other sectors or subsectors that we’re not seeing. We can do a lot more scenario planning than we would normally do, but if a company is in tough, tough market and getting kicked.

You’d really need to answer that first. And it shouldn’t be name or pointing or people pointing, because you know, replacing a CEO in a company at that point in time is not going to work if you have three months or four months of money left, you know, it needs to be all hands on deck and we need to figure out how we’re going to get the hell out of this.

So for me, that’s the obligation of the board. First and foremost, fiduciary duty towards the company and the organization. How do we sustain the organization and what do we need to do to sustain it? And then obviously over time we need to see what opportunities are there. What does this pandemic world look like and how do we act with it?

I am fortunate that I’m actually on the board of companies that are fitting. Board of directors. Luckily enough companies that are in a good position right now, either counter cyclical or in a positively co-related situation. I’m an advisor and on the advisory board to a company that’s actually going through a really rough stage in their livelihood.

But you need to act like this. You need to actually ask the valid questions about sustainability and survival. No matter what. One question, for example that we’ve had in one of the companies that I’m on the board of that seems to be actually positively co-related to the current situation is, are we really positively correlated.

And so how would we know? How would you know that we’re positively co-related?  How much data would we need? What sort of data should we be looking at? What KPIs we actually as a board, need to follow from now on that we weren’t following before? So this is I think a time where you need to do a lot of on the ground, hands dirty board work, problem solving, get really into it, no matter what type of company you are on the board of, that is the time right now.

Bertrand: Yes actually that was my point two, Nuno, around do we have the right mandate, is the mandate clear for the CEO, and hopefully the mandate is  business survival, managing the cash, and changing the plan.  

Maybe one last point, to remind some people what could be some important role of board members, especially now, in time of crisis, it’s really key to make sure that some decisions are going to be made fast, are going to be made in a rush, but still, you want to make sure they are being well   thought out. You want to make sure the right questions are asked, and the right analysis is done. Yes, everything is rush. It’s difficult times, but every decision is going to have a tremendous impact.

I like your point around are we correlated positively or negatively really, because for instance, if this analysis is done wrong, this is going to be a world of trouble. So even if you need to move fast, that’s really the time where the board can have an impact to make sure that stuff are challenged the right way, positively, constructively, so that ultimately the best decision is done, even when things will need to move very fast. 

Nuno: And it is, but again, I do want to reemphasize this. I know we are in violent agreement, but I do want to reemphasize it. It’s a time for all hands on deck. As a board member, you need to be asking CEOs and executive teams, what can I do for you? Literally right now. Who can I send emails to? Can I help you with closing that deal that will make a difference in cashflow in the next quarter or not?

Can I help you have a conversation with your team? Right now around the fact that 10% of team has been laid off. Can I help you, for example, recruiting someone who’s a superstar just got laid off from another company. This is the time where you actually need to say, what can I do for you? Obviously, capital’s number one, as I said, that’s the first conversation that needs to happen.

Can you give me more capital? And in some cases, the board members are representing investors, and they can. And in some cases there are presenting investors and they can’t, because they’ve tapped out or they don’t have more capital to deploy. They’re already deploying too much with your company, et cetera.

That’s the first one. But after that, it’s like literally as a board member, what can I do for you? How can I save you? Nothing is off the table. I mean, I’ve seen examples where it’s like, can you help me with this marketing campaign? I mean, whatever it is, if you have expertise in a specific area. You need to help, and that for me is the obligation of a board member. This is the time that will make the difference between  people that were truly helpful and people that were just, cheerleaders or standing along and they were there for the ride.

Bertrand: Yes, I totally agree, that’s what you want to do. It’s probably easier in  smaller companies, where you can have as a board member more impact, and work closer with some team members. But yes, it’s really a time to help, to support, to also question,  and ultimately make sure you all come stronger, after this. 

Conclusion (38:23)

First you survive, and two, ideally, you end up stronger, out of this. It might be stronger just because you are meaner, a more efficient running your business,  you might not have grown during that time, but you have become tougher.  But hopefully, you might even, grow bigger at some point, and get better, simply because you might be the only one having made it across the river, or maybe the ocean, I don’t know.

So yeah. tough times, a lot of work, a lot of actions, a lot of things to do, and I will say I’m quite ultimately optimistic. A lot of us are going to learn a lot, become stronger at what we do, going through time of crisis. There will be a lot of pain along the way for a lot of people, that’s for sure, on the health side, as well as on the employment, or lack of employment side.

But one thing I’ve been, positively surprised is, relatively good economic response across the world from governments, to support people in need during this time, and hopefully, we have medicine and vaccine soon, and we are going to get out of this, and go to bigger heights. 

Nuno: I’m also very optimistic Bertrand as you know, a very hopeful, And as you also know, I’m a very passionate about the whole topic of rejection and adversity as a path to growth and having given talks on it and talking quite a bit about it. I do think that rejection, adversity is the ultimate path to growth, and I believe we’ll get better governments out of this.

Unfortunately, they should have been better in the first place, but they will get better through it hopefully. We will get better companies,  and certainly better supply chains and infrastructure over time. I think this will be better for us. Ultimately I do think we will be better as human beings.

We will get something out of this that we’ve never gotten before. This is a once in a lifetime situation and in a strange way, it will bring us all much closer to each other despite all of us being much further away from each other.

Bertrand: Thank you Nuno.

Nuno: Thank you Bertrand.