Startups have had years to prepare, work on their plan, strengthen their fundamentals, and raise capital if necessary. I think the shock is that probably this is a faster onset and deeper drop scenario than most had modeled.
Every [1] startup has been thinking for the past couple years about their plan for when the recession would come. Probably hundreds of articles written in mainstream and economic/financial press over the last 2-3 years about "the coming recession" [1]. Trade war? Debt bubble popping? Auto loan credit crisis? Nope, turns out it's pandemic. Nobody saw that coming until January [3].
[1] No evidence but my guess. If they haven't it seems negligent.
People always write about coming recessions. I could "recession year 20NN" and find someone proclaiming a recession would happen that year. Given someone in the peanut gallery is always claiming recession is near imminent, when are businesses supposed to prepare? Leaving piles of purposeless cash is poor business acumen: it could be put into R&D, expanding operations, or returned to shareholders.
> Leaving piles of purposeless cash is poor business acumen: it could be put into R&D, expanding operations, or returned to shareholders.
Or put into making the company profitable, or at least not losing money. That might very well include R&D (to develop new products or more efficient ways to produce and distribute those products) or expanding operations (to leverage better economies of scale and have a better bargaining position with vendors).
Sure - different "math" for every stage of business on what to do with cash. But I think it's common (once in the revenue-generating phase) for companies to plan not to burn cash down beyond some contingency level. If the worst case scenario used in calculating that level of reserve cash is relatively mild compared to Pandemic'19 they could be headed for trouble.
I think what you can do is diversify and start thinking about business investments that would be good regardless of continued high growth or recession.
So continuing to invest in improved infra might be a good area to put your cash/resources since that will pay off really well in high growth and probably still have savings in a slower period.
It is faster and deeper and scarier than anything any leader working for a startup or VC in 2019 would have DARED put in a planning deck.
No one blogged about it in 2019, no one took a "how to navigate a pandemic-induced depression" class at business school.
That's not to say there isn't opportunity. Software engineer market comp WILL go down, as many point out, on account of shrinking RSU value. The talent war is over. It will soon be a great time to start a software company, if is not already.
Every [1] startup has been thinking for the past couple years about their plan for when the recession would come. Probably hundreds of articles written in mainstream and economic/financial press over the last 2-3 years about "the coming recession" [1]. Trade war? Debt bubble popping? Auto loan credit crisis? Nope, turns out it's pandemic. Nobody saw that coming until January [3].
[1] No evidence but my guess. If they haven't it seems negligent.
[2] here's an example from 2018 from the NYT contemplating what will be the cause of the next recession (note, not whether or if it will happen, just what will cause it) https://www.nytimes.com/2018/08/02/upshot/next-recession-thr...
[3] I mean the specific timing of this pandemic. As we've all learned now many in and out of government had warned the public.