The Corona crisis has caught the Israeli tech industry in the midst of one of its most flourishing periods ever: record hirings and spectacular exits, an avalanche of new companies, thrilling innovation and an abundance of optimism.
Yet a new reality has hit us now, one that feels frightening and uncharted. This isn’t a mere economic crisis – every aspect of society is in a whirlwind of panic and uncertainty, not just in Israel, but around the globe. Once the initial shock subsides, what can we do to survive these turbulent times – not just as survivors but as stronger players – once it is all over? Here’s some practical advice for investors and hi-tech company managers, based on years of professional experience and long discussions with dozens of our portfolio companies.
1. It’s expected that the consequences of the Corona crisis will be long-felt. This is why courage and determination are key. Now is not the time for inaction. It is precisely when everything seems to have ground to a halt that action and forward-thinking becomes paramount.
2. Reduce spending to a bare minimum. Lower the salaries of your existing employees – starting with management (yourself included). You will probably have to cope longer than expected on your current budget. Partly, this means prioritizing your most essential employees. And as unfortunate as it may be, those that are not indispensable will have to be let go.
3. In light of the global travel limitations, it is important to maintain direct communication with clients, wherever in the world they may be. Use video calls as much as possible, as they are a vital tool for the company to keep functioning. Make sure your company’s technological infrastructure allows for optimal remote access so that international cooperation isn’t interrupted.
4. Focus on your company’s most essential activities. Concentrate on the existing positives instead of expanding to other sectors.
5. Slash your sales forecast for the coming year by at least 50%. The global market is going through major turbulence and as a consequence, targets set at the start of the year cannot be met any longer. This will lower the pressure on your team and will allow you to match expectations to reality.
6. Challenging times such as these require effective interpersonal communication. Focus on your existing clients and be as attentive as possible to their needs. They’re feeling the pressure too. Let them know how important they are to you, and don’t hesitate to lower prices or extend payment schedules. Maintaining strong relationships with your existing clients is critical.
7. Make sure you keep your investors frequently updated and with full transparency. They are experienced players and their investment in your company means as much to them as it does to you.
8. Companies currently raising capital: be aware that the current market is a buyer’s market. Be flexible, raise less capital and lower your company valuation. Broaden your reach to Asian investors who are now recovering from the Coronavirus and will be looking for opportunities in the start-up nation.
9. Having a mixed portfolio of Israeli and American (founded by Israelis) companies, it’s interesting to see that our US-based companies have been much more active in understanding the situation and taking swift action, including making immediate cuts in manpower, terminating activities which are less cash-positive and eliminating all non-essential projects.
10. Use professional help. This is a time of potential conflict, stress, and uncertainty for the company’s employees. I highly recommend using mentors who specialize in relationships and effective communication. We all see the world from a very subjective point of view and react differently to a state of crisis. A good mentor can help bridge these gaps and contribute to a better outcome throughout this period.
11. Creativity, flexibility, and boldness are intrinsic to us as Israelis. So – now is the time to be Israeli. Invent new sales strategies, re-evaluate your priorities and business models. Find out and highlight how your product is relevant in this crisis. Open yourselves to new geographic and vertical markets. Believe in what you’re doing.
And remember: a crisis is the biggest opportunity.
Companies that will weather the storm successfully will find themselves in pole position later on. Be brave, demonstrate leadership, learn from this experience. Lessons learned in times of crisis are far more valuable than lessons learned in times of abundance and growth.
Alon Lifshitz is cofounder and general partner of Hanaco Ventures, a venture capital fund (founded in mid-2017) managing $400 million and investing in Israeli managed start-ups operating around the world.