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Survive and Thrive

Navigating COVID-19

Rippleworks Portfolio Ventures

April 16, 2020

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Doug Galen

Chief Executive Officer

Rippleworks Co-Founder & CEO

Lecturer, Stanford Business School
CRO, Shopkick
SVP, Shutterfly
VP, eBay
VP, E-LOAN

Andy Kaplan

Chief Financial Officer

Rippleworks Expert-in-Residence

CFO, DonorsChoose.org
CFO, Audible
CFO, Time Life Inc.
CFO, Thomson Reuters Publishing

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Where we are: Ventures on this call

Managing through financial crisis for first time

50^%

Decrease in business in 2020 because of COVID-19

35^%

Runway�(average)

10months

Expect to / may �have layoffs

60^%

Ventures Responses: 52

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Steps for navigating, surviving this crisis

What we’ll share after

Slides
Links to our favorite resources

What we’ll cover

Squeezing cash from your business
Planning in uncertain times
Reducing future expenses
Communicating layoffs
New realities of raising capital
Your role as leader
Your Q+A

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Squeezing cash out of today’s balance sheet

Dig into the working capital stack. Understand what cash is available to you now.

Cash on hand: How much and where?
Short term cash-like investments: How much, where and how liquid?
Lines of credit: time to draw them down?
Accounts Receivable: Talk with people that owe you money. What can you do to accelerate their payments to you. Offer payment discounts if you must!

Accounts Payable: Call your vendors. Assertively but sensitively discuss pain-sharing arrangements that allow you to delay payments.
Inventory: Look at ways to turn existing inventory into cash. What can be sold…be creative. Look at outstanding purchase orders and make decisions on what to buy and what to cancel.

When you have completed this, you’ll know how much cash is available now. �Next, it is time for a fresh look at your P&L and Cash Flow.

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Your 2020 budget is toast.

No one knows your business as well as you do. You can do this.

You created your 2020 budget, P&L and cash flow based on a set of assumptions in a “most-likely” case scenario.

Now you need to revise your assumptions AND look closely at alternate scenarios.

Assumptions should be grounded in your team’s assessments, informed by what you have learned from customers, suppliers, other partners.
If you look at this simply as a “budget revision” process, you will fail. It goes way, way deeper.
Question everything, especially every expense

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Time to revise

Reimagine revenue:

What “old” ways of generating revenue will continue?
What “new” ways of generating revenue can you develop?

Reimagine cost structure:

Find every way to cut costs
Consider tough decisions for your most valuable (but likely most expensive) asset - people

Create P&L and cash flow scenarios through 2021:

Build V1 and V2 so you can update them �at least twice a month until your confidence �in trends lets you do it less frequently.

Version 1	Version 2
what you expect to happen based upon what you see today.	what is the worst case �that can happen based upon what you see today.

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Find every way to cut costs: �Leave no stone unturned

Companies don’t spend money. �People spend money.

Have a real person review every invoice before payment. You will be amazed what you find when someone looking to save money is examining every penny going out the door.
Look at direct debits automatically taking money from your bank account. Consider stopping them all, so you don’t bleed without knowing it.
Have every team member that spends money sit with their manager to decide where to keep spending and where to stop spending.

More ideas for cutting costs:

Solicit NEW cost reduction ideas from every team. Fill up the page. Assess and act ASAP.
Office rent costs are being looked at through a whole new lens. Talk to your landlord now about delaying AND reducing rent payments. Get on the phone and ask.
Talk to your utility companies and any companies you are buying services from or leasing equipment from. Negotiate pain-sharing agreements with them.

You can’t cut even one person from payroll before you have done absolutely �everything else required to bring down expenses.

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Options for personnel cost cuts

We know our people are our most valuable asset.

�Reducing staff costs is very painful, but a rapid way to reduce cash expenses.

Be creative in finding ways to reduce personnel costs:

Cut exec compensation first and most
Salary reductions
Job sharing
Move to a shorter work week
Revisit benefit plans

Headcount cuts:

Sooner rather than later
Better to cut too many than too few. You never want to have a second round of layoffs
Bring more scrutiny to independent contractors than to employee headcount

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Before layoffs: How to prepare

Many groups to think about

Communication plan defined before you take action

Part of compassion is making it as easy as possible for the employee

Those leaving (by roles/teams)
Those remaining (by roles/teams)
The leaders doing the layoffs

Set the date
Choreograph the day
Script what you will say
Train managers to be empathetic, calm, and consistent, even if impacted person isn’t

Communicate the need long before you conduct layoffs
Paperwork is completed so can be quickly handed out. People know last day working, last day of payroll, laptop, etc)

You were ruthless when talking expenses. Now be compassionate when thinking of people.

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Communicating layoffs: How to do this right

Remember the WHY: We are making these gut-wrenching decisions to live �another day to drive more impact�

People can usually handle the truth but they can’t handle feeling as if �they’ve been deceived or purposely left in the dark

Tips for doing this well

Do it swiftly (ideally all on the same day/week)
Take care of people on the way out
Listen. Stick to the script.
Ensure your team staying knows their jobs are safe. Assure people that all measures have been taken to avoid future rounds of layoffs.

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Life after layoffs

Be patient. People need a some time to process. Studies show 20% decline in performance.
CEO should re-address what this means for the company, new org structure, go-forward plan
Employees want more metrics and more information than ever before
Demonstrate you are more committed to the mission than ever. People will need inspiration.
Be extremely visible - change your meeting cadence and show up in new/different meetings.
When things improve, try to hire back the qualified employees you let go

Have managers ask �their employees three questions:

Is it clear why this happened?
Is there anything we could have done better?
Do you have any questions about our new plan?

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Tips: New realities for raising capital

Raising equity

Managing existing debt:

Grants & Donations:

Focus on existing funders
Only the best of the best will get funding
Closing is winning: Don’t lose a deal because of price
Ask for 18 month runway, take 12

Be proactive. Propose new terms (New repayment plan, refinancing, principal payment deferral, etc)
Inform your lenders as soon as possible if tripping a covenant
Anticipate debt providers want sacrifice from equity players

Foundation Revenue: If in doubt, reach out.
Individuals/Corporations: Call and ask for commitments now.
Restricted Cash: Renegotiate restrictions, ask to advance overhead portion
Credit Lines: If you have one, this may be year to use it.

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Tips to lead through a crisis

✓	Be first one in, last to leave, and available on weekends.
✓	Say: “This is about survival. It’s going to be challenging” (if it is). Don’t say: “Everything is going to be OK” (if it might not be).
✓	Offer hope. Bring back your mission, vision, and the new reality you’ll get to.
✓	Over engage. Send weekly notes. Ask CFO / Controller to send weekly updates to your Board.
✓	Maintain culture Maintain existing stand-ups, 1x1s. Build space for your team to connect remotely. Schedule drop-in coffees over Zoom. Keep lighter, sillier traditions alive. Remind your team to take vacation days. Celebrate victories. Demonstrate that you value your team members - especially now.