Beth Ferreira is managing director and partner at Firstmark Capital. Prior to that, she founded and was managing director at WME Ventures, the COO of Fab and the VP of Operations and Finance at Etsy. Having both worked for startups and invested in them, Beth brings a unique perspective to the table. Additionally, she steered two companies through the 2008 recession and 9/11, so has deep experience of navigating in times of crisis. Here she discusses strategies for generating funds during a downturn.
You were at Etsy in 2008 and witnessed a startup suffering through a time of financial uncertainty. What were some of the things you did then to stay in business?
It is a scary thing - not knowing what will happen to your business. We thought we were going to close but it turned out that Etsy was a pretty good business, and the recession - though we didn’t know that at the time - was just a bump in the road.
We didn’t end up doing layoffs but we hired fewer people. At one point, no people. We thought very methodically about how our people fit in the growth of the business. Some people got promoted, some moved to different roles and some transitioned out of the company. Conversations that might have taken six to twelve months to happen were much more condensed - decisions were made faster.
How can a company strategically plan for a financial crisis?
This exercise is tough for most entrepreneurs. You want to be an absolute entrepreneur; you’re a natural optimist, right? So you want to believe that everything is going to work out but you should still plan for how you would survive should your revenue take a hit for 18 to 24 months. It may not last that long but you need to be prepared and ensure you can get to the other side.
What were you focusing on during the early weeks of COVID?
Our first thoughts were on our portfolio and ensuring they had what they needed to weather the storm. Within any portfolio, you have companies that are winners in a downturn, some that are extreme losers, and a bunch in the middle who are in decent shape but should be thinking about things differently.
Things like cash and runway are super important, with companies looking at ways to stretch their cash and elongate their runway. They begin looking at every dollar going out of the business through a new lens, deciding what is absolutely critical. Survival is about determining how you can either generate or save a significant amount of cash to see you through. It’s basically about cuts and increased efficiency.
Keep morale high during a crisis by being transparent. People want to know what's happening.
Were you still providing funding for your founders over the pandemic? Or investing in new companies?
As investors we have restrictions on the dollar amount or percentage of funds that can go into each company but we were still investing and supporting companies that we believed in and didn’t hit that threshold. We’re a venture capital firm. Our job is to invest in companies, so we will also still look at new startups.
What’s your advice on keeping morale high when things are uncertain?
Transparency - people want to know what’s happening. As much as we as business leaders don‘t want anyone to know, people figure it out, so being direct and frequently communicating is super important.
I experienced that at both Etsy and Fab. We had 500 or 600 people companies, so daily interactions didn‘t happen, but we did weekly pulse checks to have a dialogue and see what the needs were. During quarantines, you have employees who thrive, like the naturally introverted but highly extroverted people may be having a tough time, so checking in with everyone on your team is vital.
What is a strategic approach companies seeking funding should use to convince you to work with them?
That connection between investor and founder is super important. So now that we are operating primarily through Zoom, a relatively new medium for our way of doing things, we’re all learning new ways to make those connections feel genuine. This is when tapping into your networks is even more critical. We are doubling down on our network because we want to have as many touchpoints as possible.
I think the upside of where we are today is that these interactions can be much shorter. A coffee meeting that might have taken an hour is now 20 minutes. I’m finding more space in my calendar to take general networking meetings that are more impromptu.
For companies seeking funding, I’d recommend tapping into their peer, founder, and entrepreneur network for introductions. If any of the founders from my portfolio wanted me to talk to someone, I would always take that meeting.
What advice would you give to a company that’s pre-revenue?
If you are super early stage, that’s a big hurdle if I’m not meeting you in person. But if you’ve started building a product and it’s is pretty far along, and you can show me a demo or walk me through the marketing strategy, that should be enough to get me over the hump to raise some capital.
What changed on the early-stage side is there used to be a whole universe of angels - but who felt a lot of hurt in the market and were a little reticent to write the same checks. It took a little more creativity and probably a lot more calls and meetings to get those deals done.