Earnest Community Thoughts on COVID-19

The world is being rocked by COVID-19 and founders, like all of us, are trying to adjust to the new reality. We hope that you’re being as safe as possible, and staying at home, through these times.

While personal health and safety are paramount, all of the founders we work with are also seeing their businesses, teams, and companies affected by the pandemic. 

This week, we hosted an open Zoom with our community of founders and mentors to hear how they are dealing with this crisis, what they are seeing in their businesses, and how they and their teams are responding. In turbulent times, a community of other founders becomes even more critical.

Below we have catalogued some of the key observations, insights, concerns and suggestions from our notes on the conversation. Not all of these were consensus opinions and the point here is just to give a sense of what one group of founders is thinking about and considering. Interjected through are some notes from me directly with “TT Note.”

Be well and stay safe.


Warmly,
Earnest Capital 

Current impacts on the business and what’s to come

  • Many companies are seeing sharply reduced support tickets or in-product activity. One suggestion was to re-allocate support team members to product work, sales, or providing “done for you” versions of your software product.
  • Almost all teams have started freezing or cutting costs for both the people and product sides. 
    • Nearly every team has frozen any in-progress hiring plans though none as of yet have laid off any staff.
    • Some teams are directly reaching out to key technology partners/vendors they work with for discounts or refunds. 
    • Many teams have enacted a hiring freeze and are working to “repurpose” team members with above-average bandwidth to new tasks such as customer support or engineering. 

TT note: Remember these are extraordinary times for everyone and while founders should be generous, don’t be afraid to make asks of your customers, partners, and vendors too. 

  • If lay-offs are necessary the consensus was to do it quickly and decisively to not leave their team members in limbo and allow them to access unemployment benefits and other relief that may be coming.
  • Certain kinds of businesses will see increased interest from the work from home, social distancing situation. Some of our portfolio companies empower folks to learn from home or launch a side hustle. Perhaps unsurprisingly, they are seeing a surge of interest as people stuck at home finally get around to starting these projects. 

Founder & employee mental health

  • Top leadership is setting up an abundance of office hours
    • Some are using office hours for team members to talk to leadership about mission critical activities; others are leveraging office hours to focus on the lighter side of things. 
    • One founder is coordinating live stream gaming as a way to bond and process the pandemic together as a team. 
  • Over-communication from leadership is key as things change day by day.
  • Teams are placing a bigger impact/effort into reaching out and connecting with loved ones, both in-home and around the world. 
  • For founders and team members with kids, companies are sharing tips amongst each other for the best ways to WFH with kids. 
    • Others are sharing tips on how to work with their children to help them process the pandemic and its implications.

Messaging to Customers & Sales

  • Many founders have already paused or are considering pausing all cold emails or sales outreach. 
    • Some are continuing with highly directed sales outreach IF they are directly helpful in this climate (i.e., tools to enable more productivity in a WFH situation might be fine). 
    • teams are making this call on a case-by-case basis but bias towards pausing. 

TT Note: completely business as usual emails that don’t acknowledge the situation will probably come across as tone deaf but if your product is genuinely helpful in the current environment and you acknowledge what’s going on in the world, I believe it’s okay to continue with sales.

  • All teams are proactively talking to customers to see how they are doing, learn what they want/need from the product, and generally seeing how they can be helpful. 
  • Many teams are giving the support teams more autonomy to provide refunds, extend trials, and provide the best experience possible. 
    • Some teams are having their support team work on knowledge base articles, improve their FAQ, create helpful videos and other items to bolster their support offerings. 
    • Some teams are having the support team shadow other departments for more “hands on” deck (many support teams seem to have more time on their hands and teams are looking for ways to repurpose their CS efforts elsewhere in their company). 
  • For customers asking to cancel for COVID-related reasons, many founders are offering to simply pause subscriptions indefinitely and restart them whenever customers being using the products again. A small but effective change.

TT Note: it is important to be generous and this will be an opportunity to build lifelong relationships with customers. But I am also encouraging founders to be careful not to be too generous with credits and refunds in a way that they can’t sustain for months on end.

We have all seen the “flatten the curve” graph and it’s worth noting that while the successful case brings down the y-axis, it elongates the x-axis, meaning every action here is directed towards extending the current situation. 

As a first step, I recommend adding something along the lines of the following to your refund/credit emails: “we are happy to provide a credit for next month. Just so you know we are also a small independent software company and while we will do our absolute best to be supportive and flexible through this crisis, we are not Amazon and can’t offer our services for free indefinitely.”

  • Remember that this is a moment to potentially build a lifelong bond with your customers and act accordingly

Making the best of a bad situation

TT Note: look, this is a terrible situation but entrepreneurs need to adapt and consider how they can make the best of this situation. Can you adapt your product or launch something complimentary that makes life in the time of corona more productive or bearable. Do it.

  • On the whole, teams have seen that paid acquisition-related costs  are going down, so suggests to some that this might be a good time for paid marketing IF you have a good grip on the fundamentals and be very careful with your messaging.
  • For teams in the B2B space, consider redirecting energy at larger enterprises (who have a larger cash cushion than most) vs. the smaller businesses that might shut down
  • “Do things that don’t scale” makes more sense than ever right now. Most likely your opportunity costs have gone down so taking extra special care with key customers is a great idea.
  • Use the break in growth to refocus on product. Do the work on a new core premium tier feature set to have it ready to launch when we come out the other side of this.
  • Many teams are focusing on existing customers vs. going after new ones with mindset of “doing things that don’t scale” like: 
    • Targeting outreach to specific customers with bigger budgets for a premium offering where they enable their team members to jump in with manual work
  • Spending more time with current customers on calls/demos than an automated process 


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