Thursday, March 19, 2020
A Letter to Portfolio Companies – Navigating COVID-19By: Pat LaPointe, Frontier Angels Forward by Pat Gouhin, ACA CEO: We have created “Leaders in Action” so that we can share with you much of the thought leadership, conventional wisdom, and emerging trends that we are seeing within ACA. Some of the posts will be unique to ACA activity and others will be more general in nature. We are headed for challenging times for everyone. As I took a moment to reflect on the recent past and all that is going on around the world, I felt some level of comfort in being surround by a wonderful Board of Directors that is filled with vision, knowledge, experience, and the passion that will be needed to push us through the upcoming months. My second thought was that much of that wisdom should not remain isolated in a boardroom conversation. For that reason I have asked one of our many board sages for his permission to reprint a letter that was recently distributed to his portfolio companies. A special thank you goes out to Pat LaPointe for permission to push out this letter… I sent this note to all the CEOs we've partnered with at Frontier Angels. Hope you find it helpful... Dear <CEO> - I hope you and your families and friends are healthy and staying safe. There is no "sale" worth jeopardizing your health. No meeting is worth exposing yourself or your team to something for which there is presently no cure. Please be careful. I was running early stage companies in both Sept 2001 and in March of 2008. This feels EXACTLY like those situations. Fear and uncertainty reign. No one person has a completely accurate view of the situation because it is SO complex and unprecedented. In case you care, here are a few observations on how I would apply my own experience if I were running an early stage company today:
Bottom line: act fast to preserve cash so you have more options 6 or 12 months from now. Expect the situation to get far worse than you may initially think (e.g. 20% unemployment; 8-12 weeks of "social distancing"; a big viral rebound in the fall of this year; fundraising rounds taking 12-18 months). If it's any better than that, you'll be ahead of the game. I will never forget how my first big exit completely fell apart in the fall of 2001 and took many months to put back together (at a lower price). Or how I had bankruptcy papers on my desk in 2008. Or the incredible pressure of having to keep my family afloat and protect my staff - many of whom had become close friends and all of whom had families of their own. In both situations, I acted too slowly, was overly optimistic about how soon things would turn around, and pushed the company too close to the edge. I was too optimistic and overly confident of my own ability to impact a market being buffeted by forces far larger than I could overcome - no matter how hard or smart I worked. But we adapted, learned, and thrived. You can too. We (Frontier Angels) are huge fans of you and your team and want to help. We are still investing. What we're looking for are companies who A) have good market traction, B) have the ability to ratchet-down their monthly burn rate, C) are sufficiently well financed to seize opportunities in the market, and D) have CEOs who are not prone to mistaking hope for judgment. Call anytime we can help with anything. Stay well; act fast. Remember, YOU are the core of your asset. Take care of YOU. |