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Letter to startups from Sequoia Capital regarding coronavirus

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Here is a letter that we sent today to the founders and CEO of the projects that Sequoia Capital has invested in. It provides guidance on how to keep your business up to date with the potential consequences of coronavirus.

Dear founders and CEOs of the companies, coronavirus is the “black swan” of 2020, which has significant consequences. Some of you (and some of us) have already been directly affected by the virus. We know how stressful you are, and we are here to help you. We hope that the conditions will get better as soon as possible. Meanwhile, we must gather our strength and prepare for the scenarios that may take place in the near future.

All of you are bombarded with tips on how to protect your health, the health of your workers and your family from COVID-19. Like many others, we have studied the available information and would be happy to share our point of view - please let us know if you are interested. But this letter is about something else - namely, about ensuring the operability of your business against the background of the
potential consequences of the spreading effects of coronavirus. Unfortunately, due to the presence of Sequoia in many regions around the world, we get first-hand information about the impact of coronavirus on global business. As in the case of any crisis, there are types of business that only benefit from it. However, many companies in advanced countries face the following problems as a result of a virus outbreak:

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Before we can be sure that the virus is “under control,” a considerable amount of time will pass — perhaps several blocks. It will take even more time for the world economy to return to a stable state. Some of you may experience reduced demand; others may run into supply problems. While the Federal Reserve and other central banks can lower interest rates, monetary policy can be an ineffective way of mitigating the economic impact of the global crisis caused by the epidemic.

We advise you to evaluate each of the following points within your business:

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Our company has already gone through several crises for almost 50 years. Thanks to this, we learned an important lesson - no one ever regrets that he acted quickly and decisively, adapting to changing circumstances. During periods of recession, the level of income and cash always falls faster than expenses. In a sense, business reflects biology. As Darwin suggested, those who survive are "not the most powerful and not the smartest, but the most adaptable to change."

A distinctive feature of stable companies is how their leaders respond to such situations. All your employees know about COVID-19 and are wondering how you will
respond and what it means to them. False optimism can easily lead you astray and prevent you from making contingency plans or prevent you from taking bold actions. Avoid this trap, be realistic and act decisively. Demonstrate the leadership your team needs in this difficult time. Below is the point of view of our partner Alfred Lin, who survived the last major crisis as the CEO of a well-known company:
“I worked as the executive / financial director at Zappos when I was called to the Sequoia office, where we were shown the infamous presentation,“ Good times, rest in peace. ” This was in 2008 right before the financial crisis. We did not know then, nor do we know now, how long or how significant or insignificant the decline will be. I am only sure that the presentation we saw made our team and our business stronger. Zappos defeated the financial crisis, as it was ready to seize on opportunities, while our competitors were defeated. ”

Stay healthy, keep your company healthy and together we will cope with the least losses for the world.

Best regards,
Sequoia Team

Translation: Olga Filatova

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