Struggling with Uncertainty in Finance and Operations post-Series A
You're VC-backed, you've hit product-market fit and you are scaling like mad.
How do you plan for 2020 given how much has changed and given how much uncertainty there is in the rest of the year?
- Cash and runway are king.
- Try to position your business so that you have at least 24 months of runway.
- Target cash runway through Christmas 2021, and find a plan that gets you there.
- Brainstorm and prioritize cash burn improvement tactics.
- What is your monthly burn now, and what target number would extend your runway to 24 months?
- Make pessimistic assumptions about revenue (e.g., 20% / 50% / 80% miss on topline), with downsides to gross margin.
- Make pessimistic assumptions about working capital (e.g., customer defaults, payment delays, tighter credit, supply chain disruptions)
- Generate a long list of potential expense reduction and working capital improvements between now and 2022 — you may not have to actually make those cuts, but have the list and get ready to prioritize.
- Communicate with your stakeholders to prioritize levers
- Group your financial levers into buckets like revenue, expense, working capital, and equity / debt.
- Communicate often and openly to make sure you’re in agreement with the stakeholders on your board and executive team.
- Use a simple table like the below to drive conversation around prioritization.
What are opportunities and challenges of raising capital over the next three months?
- Universally everyone wants to take a breath, take stock of where things are, and exercise caution.
- Venture firms are hyper-focused on working with their existing portfolio right now.
- This doesn’t mean deals won’t happen, but the bar will be raised across the board.