The world is under pressure. Health and financial systems are being put under extreme pressure, causing cracks to be seen. The small cracks are currently showing themselves in the increased numbers of people being “furloughed” or actually out there looking for work.

While governments round the globe are trying to deal with this problem head-on, there is never a more important time to follow up on the campaign late last year and ask all of those we know in the start-up community:

“Are you okay?”

Right off the bat, I am not a psychologist. Neither am I writing this piece as a “woe is me” piece from a start-up founder. Instead, this is a result of me having survived 2 recessions, one as a corporate lender and second as a business person. I have tried to rationalise my own meandering experience in those difficult times, blending them with some deeper thinking about the current Coronavirus phase and where it may take all our businesses in the next 3–6 months. More importantly, it is about looking at the effects on business owners’ mental health going forward; to help individuals plan and to seek help where they need it. We all want to hope for the best; but we have to plan for the worst.

Let’s start by looking at where all the Coronavirus phase may take us.

There are three main inter-connected shocks that are facing small business, right now:

Demand Shocks

Supply Shocks

Financial Shocks

These shocks look as if they may get progressively worse as the global pandemic worsens and lockdowns become the de facto standard globally.

Demand Shocks

“The multiplier effect” — John Maynard Keynes, a UK economist, back in the 1930’s talked about the multiplier effect. This is an effect global governments know only too well. If a company lays off people, those people no longer have money to spend. This in turn means instead of having two coffees a day you might reduce to one — or going to the hairdresser every 8 weeks rather than every 4. This then directly affects the incomes of those businesses you use directly. They in turn cut back staff, who then don’t spend money and so we get perilously close to a negative, multiplying downward spiral. These effects will especially adversely affect revenues for those of you that have B2C businesses.

Most Enterprises will, and indeed are already beginning to, lay off contract workers first. Contract workers give them cost flexibility — and they are taking advantage of that. This is already beginning to happen, especially in hospitality.

“Innovation” — the Enterprise sector as a whole is heading into a deep “holding pattern”, until boards of directors fully understand the financial and risk management of the coronavirus landscape. They will be rationalising the very difficult balance of layoffs against revenues and putting longer-term strategies on hold. As part of this holding pattern, discretionary spending (i.e. spending that is deemed as not being critical) will be cut back. During the two recessions I have worked through, advertising and marketing were always the first things to go. It is a knee-jerk reaction to the survival instinct. You preserve everything you can. Once your cash has gone it can’t magically re-appear. Innovation is part of longer-term strategies for the majority of Enterprises — so expect those budgets to be cut — even early adopters… We have experienced this directly with a major Asian Bank — they love the products we have to offer, but they are having to aggressively deal with the coronavirus locally.

“Regulation” — many startups, especially Fintechs, like ourselves, are awaiting regulatory changes that will see our respective markets potentially explode. Governments are the lawmakers that need to effect legislative change; regulators regulate within the confines of the law determined by governments. Governments are currently in lockdown globally, dealing with the national and international problems of the pressure on health resources. Regulation and new ideas are furthest from their minds. How will this affect your business in the longer-term? In our case it will delay the likely timing of the major upscale in revenues – so we have to plan for this accordingly and keep our investors and potential investors in the loop.

Financial Shocks:

Financial Shocks are often from two directions — demand and supply — but these are the most important to consider. “Cash is king” has always been a mantra during recessions. Businesses do not go bust because of a lack of profit — but through a lack of cash (although of course in the long run without profit you are out of business). Let’s see the likely cash shocks you will face:

  • Customers won’t be paying you on time, if at all. Expect more cancellations of SaaS models as budgets are shaved. For B2B businesses, expect if your customers to cut back on non-essentials. Equally, if Enterprise customers are not paying your customers, they won’t have the cashflow to pay you on time — you need to think about this now before it is too late and plan for this as best you can.
  • If your customers cut back on discretionary spending — your top-line revenues will fade away — this will have an effect on your cashflow. Again, this needs to be faced and planned for.
  • Banks — whilst some banks are saying some very positive things about payment and interest “holidays”, if you are trying to raise an overdraft currently to help you survive — expect it to be incredibly difficult to get new facilities through their credit teams. Whilst they are generally being very supportive, this support is typically for current clients only — not new clients. Expect it to get increasingly tough — there is a reason why bank shares fall dramatically whenever there is talk of recession — bad debts rise, their income falls and credit gets tighter.
  • Investors — have a greater position of strength. With the financial markets in turmoil. global investors are increasingly risk-averse with many just sitting on cash right now. Cash doesn’t lose investors’ money (unless we get to negative interest rates — but that is a much wider issue). No-one truly knows when this coronavirus phase will end, which creates increased risk. Investors hate risk — risk means they are facing increased chances of losses — which they do not want. Expect to have to sell hard and to negotiate hard. We are in the middle of our own capital-raise and we know it will be harder and take a lot longer to get a deal finalised.

Supply Shocks

  • Your business needs its suppliers. The supply shock of Wuhan and China in general affected supply chains globally. Now that the virus is affecting other countries, global supply chains will be interrupted leading to supplies becoming increasingly tight — which means you may have less to sell, which has a damaging effect on your revenues and cashflows.
  • Your suppliers will also be adversely affected by the same demand and financial shocks you are facing. Expect suppliers to be demanding tighter credit terms — e.g. credit card or cash as their own cashflow will be restricted to manufacture or buy new goods. (If they do ask for cash you can, of course, negotiate healthy early payment discounts.)


The end result of these three shocks, is that there are increased pressures on small businesses in general and start-ups in particular. These pressures, however, hone in with horrendous, laser-like force at one level — the founder level.

  • You may have to face the situation of having to let people go, people who joined you on the basis of the shared vision you had. That is always a very tough call.
  • You may have to undertake roles that were done by others beforehand — it’s tough on you individually, but you have to suck it up and do it — the buck stops with you.
  • You may be facing severe cashflow pressure. There is nothing worse than getting hounded by suppliers or your team. Commercial decisions tend to become inward-looking and short-term, not outward-looking and long-term.
  • You will be facing Clients saying no — or at best “not yet … until the coronavirus plays out”
  • You will be losing sleep and probably become very irritable — more often than not with the ones that are closest to you.
  • At worst, you may have to face the reality of having to close your business.

But the most important thing is that you are not alone. Other founders will be going through the exact same issues. The challenge, however, is that with “social distancing”, comes a potential new reality,“social isolation”:

  • Gone are the networking events that used to be great for business but also for you individual social well being (not to mention the free beer and pizza, which saved your precious start-up budgets)
  • Increasingly gone are the social gatherings that we all need to talk business issues through with our wider networks. In many countries nightclubs, bars and coffee shops are closed.

While there will also be opportunities in this new landscape, the majority of us will face some pain. So, it is important to plan and here is an idea.

In the start-up community, we all know multiple entrepreneurs and others will be facing challenges. It is the time to galvanise relationships. How about committing to speaking with at least three other founders every day. Speak with each other. Call them by phone, zoom or skype or arrange for a coffee (whilst we all still can) and just ask :

“Are you okay?”

As a start-up community, we will get through this, but none of us know how or when it will end. Some in the community will be better at coping than others with the increased stress and uncertainty, and often the friendly voice at the end of the line is sometimes all we need.

Stay safe.

Tim Lea is the CEO of Fractonium, that is developing a fractional funding platform that turns traditional Corporate Funding on its head.