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Q3 2021 Atlantic Canada Tech Ecosystem - Job Creation

Startups and venture capital continue to climb and smash previous records locally and globally. According to Omers, nine of the top 25 Canadian tech exits ever have occurred since January of 2020.

Here in Atlantic Canada, we continue to see lots of momentum.  In Q3 2021 there was a continued increase in net new jobs in the startup ecosystem in Atlantic Canada.  The number of jobs increased by about 809, bringing the number of employed by the sector to 12,525.  Year to date there have been a net new 1,994 jobs created in the startup sector, in comparison to only 654 in all of 2020.

Of the companies that I’m tracking 28% hired employees, 46% had no change and 26% had less staff than the beginning of the year. 

There was some big news out of the region in Q3 2021:

We release job creation data each quarter for Atlantic Canada. If you’d like to receive future job creation data from the industry, please subscribe to our newsletter, by clicking here.

Job Creation Champions: Top Tech Atlantic Canadian Employers

Sorted by net new jobs created

In the early days of any startup, the future seems bright. As a founder, you’re full of hopes and dreams, and optimism is the name of the game. But what happens when you’re six months in, there’s little to no growth, and cash is tight?

In this guide, we’ll help you create a plan for weathering the tough times. It’s time to put your entire business under a microscope so you live to fight another day.

Change Your Strategy

First, it’s time to rethink your initial business strategy. While growth and scalability are always huge concerns, cash management is the most important goal right now. Everything you do for the foreseeable future should focus on cash flow and getting past the startup phase.

That may mean some difficult choices are on the horizon. You will definitely need to give up discretionary expenses. You’ll probably need to rethink your marketing efforts. You may even need to cut salaries or initiate layoffs.

These are hard decisions, but it’s important to think about one thing: In a year, if your company is insolvent and forced into bankruptcy, what will be your biggest regrets? Which difficult decisions can you make now to prevent this worst-case scenario from becoming a reality? That’s where you need to focus your efforts.

Create Your Foolproof Plan

Before you take any action, it’s time to step back and strategize. Otherwise, you’re just throwing spaghetti at the wall and hoping something sticks.  Here are four steps you can take that will give you the insights you need:

1. Forecast your cash flow.

Before you can plan for the future, you have to take inventory of your current situation. Cash management is the primary objective, so let’s look at that first. How much do you have on hand? How much will you have tomorrow? What about next week? Next month? Next quarter?

A cash flow forecast is your best friend when cash is tight. Sure, things may change, but this is the best indication of where you’ll be in the future.

If you’ve never predicted your cash flow before, here’s how:

First, look at your current cash accounts. What’s the reconciled balance of each one?

Next, look at your upcoming revenues. How much money do you expect to receive within the forecasted time period?

Finally, look at your upcoming expenses. What bills, subscriptions, and other expenses are due within the forecasted period?

The resulting number is your cash balance. It tells you where you’ll be if everything goes according to plan based on the information you have now.

2. Plan for various scenarios.

Next, you need to consider the possibilities. Make a list of every scenario you can imagine for a given time period. First, focus on the immediate future—monthly scenarios are a great place to start.

With everything you know now, where are you most likely to end up with next month? Don’t be overly optimistic. Most startups are eager and feel like every challenge is just a new opportunity. While that’s an amazingly helpful outlook in many situations, this exercise requires more caution. What’s the best-case scenario? What’s the worst-case scenario? What are the middle-ground possibilities?

3. Create a course of action.

With your various scenarios in mind, what actions are most prudent? In other words, if X scenario actually happens, what’s the plan of attack?

For example, let’s assume you lose 20% of your customers next month. It’s a dismal situation, right? What would help? If that actually happens, how will you change your current operations to ensure your business remains solvent?

Work through this exercise with every single scenario so you’re prepared no matter what.

4. Consider the timing.

Why do you need to plan so much? Because timing is absolutely everything. What happens if you overreact today, lay off half your workforce, and have a huge influx of new customers next week? You likely won’t have the resources to keep up with demand. Conversely, what if you wait too long for layoffs and burn through cash faster than you expect? You’ll probably face even more layoffs down the road.

Remember that doing nothing is also a choice—and sometimes it’s the right choice. Make a plan for each scenario, then be prepared to execute that plan when the timing is right. Tell your most crucial team members, “If X happens, we’re doing Y and Z.” For example, “If revenue doesn’t grow by June 30 and our bank balance hits $100k, we’re executing layoffs.”

Executing Your Plan

Now that you have your plan. It’s time to start putting it into motion. First, let’s focus on the obvious strategy: increasing your revenue. If you’re short on cash, stronger cash flow practices are the easiest, best solution.

Increase Your Revenue

1. Take inventory of your customers.

Let’s consider your current customers. They are the bread and butter of your company and you need to do everything you can to keep them happy. So let’s take stock.

Which ones are your strongest customers? Do they pay regularly? Could you offer incentives in exchange for upfront payment? You might offer an annual subscription for a discount or create subscription tiers with enticing offers.

Which customers expressed interest but couldn’t afford to pay full price? Now maybe the time to offer discounts in exchange for cash.

Which customers are most likely to leave? Churn is always your enemy, but now more than ever. How can you provide greater value to these customers? What do they need that you can offer?

2. Focus on your receivables.

Collections can be tricky, but they’re a great way to boost cash flow. If you’re behind on invoicing, get on top of that now. If customers are behind on payments, it’s time to take action. This doesn’t necessarily mean disaster for your relationship either. Offer to waive late fees or create discounts for upfront payments. Do whatever you need to get cash in the bank now.

Reduce Your Expenses

After focusing on revenue generation, now you can focus on expenses. It’s time to cut corners and negotiate with vendors.

1. Rent

If your company isn’t remote then rent is probably your largest monthly expense. How can you lower this expense? Can your team work remotely? Could you share a rental with another business? Can you negotiate better terms with your landlord? (Don’t say “no” to this option until you’ve asked.)

Many landlords are willing to work with a business when cash is tight. For them, it’s often easier to work with a current tenant than to re-lease the space entirely. You could forego one or two payments, then spread them out throughout the remainder of the lease or tack them on at the end.

2. Cancel subscriptions.

Nearly every business has more subscriptions than they need. Pore over your credit card statements and see which services you actually use. Cut the rest. Many subscriptions charge per user or per license. Make sure you’re only paying for what you really need. If necessary, cancel all the credit cards and start over from scratch. 

3. Go through each line item.

Look over your accounts line item by line item. What expenses are essential? Which ones can be reduced? Which ones can be eliminated completely? This exercise takes a bit of time and effort, but it usually pays off quickly. With any luck, you’ll find a few charges you can recoup immediately.

4. Reconsider retainers.

Retainers are usually a luxury, not a necessity. Look over your finances to determine which services you actually need enough to pay a retainer fee. Convert the rest to an “as needed” basis.

5. Focus your marketing.

While you shouldn’t cut marketing expenses entirely, it may be time to refocus your efforts on creating cash flow. Focus on profitable campaigns and shed the rest.

6. Review your accounts payable.

At a minimum, review your accounts payable weekly. Negotiate terms with your largest vendors. Stretch your payments as far into the future as possible. Prioritize your longest contracts, oldest vendors, and upfront payments. Cease discretionary spending completely.

7. Restrict access to accounts and credit cards.

All the cost-cutting in the world won’t matter if people still have access to your accounts. Turn off your auto payments and restrict employee access. Cancel credit cards and issue new ones if necessary. Keep a close eye on transactions and make sure no one has unauthorized access to your cash.

Leverage Debt

After analyzing both your revenue and expenses, it’s time to look at other alternatives for cash. You should always use debt with caution, but sometimes it’s necessary to leverage your debt to get through a tight stretch. Whichever route you take, though, remember: You need a plan (revisit your cash flow plan from earlier). In other words, you should never sign up for new debt without a plan for the future. Otherwise, you could end up in the situation—or much worse—just a few months down the road.  Be weary of personal guarantees on your debt facilities.  Remember, startups are high-risk and don’t always work out, and it’s not always worth putting everything you personally own on the line.

1. Make a list of your options.

Consider every possible debt option you have at your disposal. Short-term loans, long-term loans, credit cards, etc. Which ones take priority? Which ones should you use now, and which ones are a “worst-case scenario” option?

2. Consider a line of credit.

If you don’t have a line of credit, now may be the time to get one. These are flexible credit options that give you cash when you need it. It’s great to have the credit available, even if you never use it. Apply for a credit line when business is good, so it’s ready when you need it.

Salaries & Layoffs

No one wants to cut salaries or initiate layoffs, but sometimes it’s the only option. If you’re at that point or think you could be soon, here are your options.

1. Defer Founder/Management salaries.

If you and other founders are currently taking a salary from the company, consider deferring or reducing it until cash flow increases. This isn’t always an option due to personal circumstances, but it’s a quick way to reduce your burn without crushing morale.

2. Freeze your hiring.

If you haven’t already, tell every manager to freeze hiring until further notice.

3. Reduce benefits.

Before you make salary cuts or institute layoffs, look at your benefits package – Can you cut expenses here?

4. Cut salaries.

If that’s still not enough, it may be time to cut salaries. Of course, your employees won’t like it. Who would? But it’s much better than losing your job completely, and if you plan well, you will hopefully be in a position to reinstate full salaries in the future.

5. Execute layoffs.

If the worst happens and you need to lay off employees, do it all at once. It’s much better to make one sweeping decision than to lay off two employees now, then five more later, etc. Otherwise, your team will live in constant fear that a new layoff is just around the corner.

Look for Funding

Finally, if you need a quick cash boost, it’s time to look for more funding.

1. Consider government programs.

Look for government support programs that may bring new cash to your business. Consider grants, loans, and other types of financial assistance. Approval processes can be slow, so take that into consideration.

2. Engage with your existing investors.

If you’ve kept your investors up to date ask if they might be in a position to provide additional investment. They may not be willing or able to help, but you need to know that so you can evaluate other options. Even if you don’t need cash immediately, let them know the current situation and ask if they’re able to help when the time arises.

Final Thoughts

Every startup faces cash flow issues at some point or another. It’s most important that you make it through and live to fight another day. Now is the time to create a plan of attack. Firstly, consider the various scenarios, look at your options, and assemble your strategies. These steps are crucial if you want to ride out the storm ahead.

Fundraising: The Benefits of a Great Investor Update

When most people think of investor updates, they usually think about the quarterly results that publicly traded companies send out to investors and stakeholders. But, this practice shouldn’t be limited to just public companies. After all, going through the process of producing an investor update forces management to think about how the company has been progressing and the direction in which the company is going. It helps investors get on the same page so there are no surprises. 

Great investor updates can have long-lasting effects, benefiting both the company, the investor, and the relationship between the two.

Why send out investor updates? 

According to Visible, “Companies that provide regular investor updates are 300% more likely to receive follow-on funding”. Why? Because sending updates to investors makes you accountable to them. At the end of each period (whether that’s monthly or quarterly), people will be expecting to hear from you about how the company performed. This narrative tells how the company is progressing, showcases your team’s accomplishments, and lays out the plan for the future. It gives you an opportunity to explain any missteps your company made and how it’s recovering from them, along with any corresponding pivots your business has made or is planning to make. 

Investor updates allow you to construct a window into your business. This is a place where you can share big wins or ask for help. It is a place where you can share specific data points that may entice future investors (if that is your goal). Investor updates are all about showing momentum while being transparent along the way. Investors invest in lines, not dots

Another benefit of writing investor updates is that it allows you to reflect on the previous period for your own business. Ask yourself if you did what you said you were going to do. Did you get distracted? Did you surpass your expectations? These updates are a great forum for you to write a summary of what happened over the last cycle, whether it is good or bad. It gives you a chance to create a plan going forward into the next period.

What makes up a good investor update?

There is a balance between the length of an investor update and the type of information you provide. Most of the time, bullet points or one to two sentences about a particular topic will suffice. Give the recipients a high-level overview of what is going on in the business. If someone wants to know more about a certain topic, they can usually just ask. This does not give you an excuse to glaze over important data points, however, and some of the best investor updates are rich with data and commentary.

The stage of your business—whether you are pre-revenue, have a little revenue, or are well-established—will determine what type of data is even available for you to include in an investor update. Usually, the following data points are a good start. (Pick what applies to you and do not add something if it is not relevant.)

  • Revenue (MRR/ARR or run rate)
  • Sales funnel info (leads, demo calls, closed deals, etc.)
  • Burn/runway (ideally both)
  • Usage metrics (DAU, MAU) 

The metrics above are merely just a sample. Be sure to include anything that is relevant to your market, business model and/or sector, or that you think is important. I have seen some entrepreneurs go the extra step and create a dashboard that shows how these metrics have improved or declined over time. Something like this can be easily hosted in a “view only” Google sheet that is shared with everybody.

In addition to quantitative data, a nice add-on is some qualitative commentary to go with it. Here are some common items I have seen that help generate some action items for the reader:

  • What we need help with: Connections? Introductions? Hiring? Planning? Be open and honest in this section. It usually pays off and shows you which people are really invested in seeing you succeed. 
  • What keeps you up at night: Worries about missing an implementation deadline, leads are not converting, etc.
  • Big wins: What went really well this month?
  • Upcoming events/business schedule: Is your business an exhibitor at an upcoming conference? Are you participating in an upcoming pitch competition? Speaking at an industry event? This is your chance to showcase what things the business is doing publicly.

A section that I tend to like is your own analysis of the market and the business. This is more appropriate to do on a quarterly, or even an annual, basis. Something like this can be as long or as short as you want, but there is nothing better than knowing an entrepreneur is fully in tune with what is going on in the bigger picture. Discussion points can be notable M&A, new competition or changing competitive dynamics, any major funding rounds both private and public, and even macroeconomic trends that are evolving over time. This section is your opportunity as an entrepreneur to showcase your expertise in your market. It shows that you are able to operate on the day-to-day level as well as think about the big picture. And if you are looking to entice investors, remember that good investors are always thinking about the big picture.

Lastly, do not forget to include some fun things. This includes bullet points or short sentences around customer quotes, personal team wins, and product additions. You could even thank those who helped the business during the previous period. 

How to send an investor update:

Our favorite investor updates are quick and to the point—they don’t have to be multi-page PDFs, in fact usually less is more. The common mediums are via email or through a tool like HubSpot or DocSend. Tools like Visible, MailChimp, or Paper Street are common as well. Whichever method you choose, make sure your investor update is informative, engaging, and upbeat.

Investor updates are only one piece of the puzzle that is fundraising. If you’re interested in learning more about investor updates, fundraising, and how to create FOMO during your fundraise, then our last webinar with Visible is for you. You can watch the webinar on demand anytime, here: Creating FOMO In Your Fundraise – YouTube