COVID-19 has had an immediate impact on almost every industry. Almost overnight, consumers and professionals alike have rapidly adopted new technologies and tools to communicate, transact, work and live. The real estate industry is no exception, but probably not how you’d think.

While in previous economic downturns we saw the residential real estate market and the services that support it plummet, that’s not the case today. In fact, new home sales rose 21% last month from a year earlier despite nationwide lockdowns . And record low inventory and declining mortgage rates continue to support pricing strength and buyer demand. In addition, the pandemic has accelerated the digitization of real estate in a big way with agents and brokers turning to technologies to manage the sales process–from conducting virtual property tours to moving legal paperwork to the cloud to close deals remotely.

In contrast, commercial real estate markets—particularly office and retail—are being impacted quite differently and in many cases negatively. Because office closure requirements and mandatory remote work are still very much in place for many businesses, many businesses are either letting go of their leases or are continuing to pay for them despite a halt in foot traffic.

But there’s a silver lining: Whether you’re in residential or commercial real estate, embracing technology will help win over buyers, sellers, residents and tenants. Property technology, or PropTech, has been helping real estate companies gain a competitive edge for years. COVID-19 has accelerated the trend by creating the forcing function the real estate industry needed to upgrade its processes and tools.

Automated tools help agents deliver a better customer experience

Today’s consumers are tech-savvy. Home buyers and sellers have come to expect the same seamless and convenient experience they get when shopping on Amazon, ordering from DoorDash or communicating on Zoom. Now more than ever, and thanks in part to COVID-19, consumers are used to communicating virtually and transacting remotely.

I’ve said in the past that I believe automating the real estate transaction is the next $100 billion opportunity in real estate. And while the real estate industry has historically been slow to adopt technology, COVID-19 appears to be accelerating its adoption in many ways:

• Document management — DocuSign, a previous Sapphire Ventures investment and now a public company, has been the go-to resource for digitizing legal documents. More recent entrants like Notarize and Snapdocs are enabling further digitization and online workflows, and have experienced rapid adoption in the wake of COVID-19.
• Closing efficiencies — A cadre of PropTech startups, including Modus, JetClosing, Spruce and Endpoint, have all significantly streamlined transactions and sped up the closing process.
• Transaction volume increases — Side, one of our portfolio companies, is a full-service support system that arms top-producing agents with robust technology that helps them grow their business without having to worry about straining their operations.

PropTech solutions are modernizing the buying and selling experience, speeding up the process beginning-to-end. Electronic signatures, document checklists and cloud storage services help agents and buyers collaborate virtually and easily keep critical files in order. Real estate businesses that adopt these technologies will delight consumers and emerge from this downturn in a stronger position than their competitors. On the flip side, failure to adopt tech tools the simplify real estate buying and selling can lead to a poor customer experience, which is not worth the risk in the current economic climate.

Commercial real estate moves to digital to boost tenant retention

According to a Deloitte survey published before the pandemic, 56 percent commercial real estate executives said they plan to increase their investments in tenant experience. Digitizing the workplace was already top of mind for industry leaders. But now as many retail businesses reopen and employers develop their return-to-work strategies in a post COVID-19 world, it’s a critical time for PropTech startups in the commercial real estate sector to adapt to new tenant needs, and fast.

PropTech startups have been developing innovative new office technologies for years, but they’re now more timely than ever. For example, Density uses computer vision technology to measure the movement and density of people in an office, which will be a key tool in determining return-to-work strategies for many building owners and employers. HqO, another start-up, creates software that helps office buildings operate digitally. Tenants can use HqO’s app to enter the building, order meals for delivery and even find nearby fitness classes. Property owners use the real-time data to optimize features based on how tenants are using the building. And newer companies such as SmartRent design custom device packages based on information gathered during on-premise inspections of community properties. Landlords are able to facilitate lease management, move-ins/move-outs and work orders directly from one app—an essential capability in a world where in-person interactions are no longer an option.

Given the rise of digital adoption in consumers’ everyday lives, tenants (both residential and commercial) are increasingly expecting properties to offer easy-to-use technological features. Property managers and landlords must move fast to stay ahead of these expectations by working with startups to improve operations.

Buyers and sellers rely on data platforms to make intelligent decisions

PropTech is increasingly being used to provide an information edge for buyers and sellers, and across both residential and commercial real estate. Another one of our portfolio companies, Reonomy, is an AI-powered commerce real estate database consisting of 49 million listings, which helps lenders, brokers and investors win more business and make faster decisions. One of the company’s features alerts customers if a property is in need of a repair—a smart finding that can save investors a bundle on long-term maintenance costs.

Specific property details, such as owner information, property valuation, land use and historical transactions, are essential to securing undervalued properties before the competition arrives. That’s why PropTech startups are building databases to streamline the real estate discovery process.

In another example, startups such as Placer and LocateAI are helping retailers determinate where to open new locations based on traffic patterns. These tools are also essential for helping determine lodging needs, which is an industry on pace to lose up to $400 million in room revenue per day. LocateAI data shows

that hotel traffic in certain cities are well ahead of the nation, which can be useful for discovering relative investment opportunities. Based on LocateAI’s data, Seattle appears to be one city that has almost fully recovered from its COVID-19 related slump in hotel and motel traffic (+12.6% traffic growth in May compared to February versus the national average of -24.3% during the same period).

The information edge will become more important as more data becomes accessible. The real estate industry is in the midst of a technological transformation and the competition will be fierce. But we believe PropTech will help empower those in the industry willing to turn to data to help make informed and strategic decisions—whether opening a new retail store or buying personal property.

PropTech is the next big opportunity to modernize real estate

Startups are at the forefront of a major shift to the digital era, offering tools such as virtual tours and AI that will help real estate professionals stay competitive. New and emerging technologies will help accelerate the closing process and enable accurate information flow between buyers and sellers.

When it comes to administrative work and document-sharing, manual tasks are a thing of the past. PropTech solutions such as automated document management and cloud storage create efficiencies that help agents grow their business and improve customer service. We’re also noticing a rise in digital platforms that can streamline property management, personalize the on-premise experience and ultimately, boost tenant retention. And AI-powered database services provide an information advantage for deal sourcing and property due diligence.

Real estate is one of the largest asset classes in the world, which is why we see massive potential for disruption. It’s been long overdue, and we’re excited for the industry’s next innovation wave and look forward to more startups leading the way.

In our recent post on ways B2B companies can build revenue resiliency, we wrote about the importance of rigorously assessing the risk of your current and potential customers based on the recent shocks they are experiencing. What makes this economic disruption and the impact it is having on businesses unlike any other is the uneven and global effect it is having on companies. In some instances, companies are experiencing a tailwind from these events and as a result have seen a surge in demand for their product or service, while many others are facing detrimental headwinds.

Many of our portfolio companies are in the process of assessing existing customer and prospect risk–something they’ve been doing since the onset of the pandemic, but has now become much more difficult because of it. With the new quarter upon us, we know many CROs and sales leaders are once again taking a look at the next three months and are mapping out how best to navigate what’s ahead.

That’s why the Portfolio Growth team at Sapphire Ventures pulled together the Prospect Risk Assessment Model. This model is a framework for CROs and sales teams to leverage so that they can better measure and understand how potential customers are being affected by the crisis. By utilizing the following framework, which looks at four key factors, teams can adjust their GTM motions across a continuum of potential changes for each prospect rather than making a binary choice that will be less effective:

• Location: Evaluate how your prospect has been impacted by COVID-19 based on their geographic location.
• Size of Business: A prospect’s size (via employee count and/or revenue) is a relevant indicator of financial strength and how IT budgets may be impacted by COVID-19.
• Industry: COVID-19 has created a wide range of business impacts across industries and sub-industries. As we know, some are being hit more than others.
• Solution Relevance: COVID-19 is causing businesses and IT organizations to look for technologies to solve time-sensitive pain points.

View the Risk Assessment Model Here:

Our hope is that this framework provides a model that you as a CRO or sales leader can use to understand how this disruption may impact your business relationships, sales discussions and commercial opportunities. We believe that those that respond quickly with tailored GTM motions will be able to continue to strengthen their relationships with prospects, preserve ARR and identify new revenue opportunities.

No one could have predicted that an international healthcare crisis would have caused the economic downturn we find ourselves in. But one thing is for certain, we knew a slowdown would come. The markets have been performing well for too long, according to all historical benchmarks. And when that happens, as history shows, a financial reset will typically take place.

That doesn’t change the fact that every economic downturn is painful. People lose their jobs, companies fold and morale takes a hit. But as with every recession, society adapts and perseveres. It will take some time to get through this hump, but on the other side of it new jobs will be created, groundbreaking companies will emerge and life will resume.

Since the onset of the pandemic, we’ve been in close contact with the CEOs of our portfolio companies. In conversations with these seasoned leaders, a few of them shared learnings from previous recessions, including advice to weather the storm and what they fear most, which we wanted to share here.

Ramin Sayar, CEO of Sumo Logic

Sumo Logic is is a cloud-based machine data analytics company focusing on security, operations and BI use cases

I, like most of the Sumo Logic management team, have lived and worked through the dotcom crash and the 2008 financial crisis, which gives me and my team a real appreciation for just how difficult it can be to not just survive, but truly thrive and grow during these periods.

Fear is fueled by the unknowns, and the COVID-19 crisis is full of them. But, if there is anything that we have all learned from the past crisis is that you have to take action immediately. At Sumo Logic, we activated an Emergency Management Committee, which is a cross-section of leaders and functional experts. We did this early on and launched three parallel workstreams:

• A team that addresses the health and productivity of our employees.
• Another that focuses on the health of our service and the customers we serve.
• Lastly, a team dedicated to the health of our business.

We immediately created a COVID-19 war room that provides real-time updates to executives and employees, as well as customers through different communication vehicles.

• We are very much still in the middle of this crisis, so here’s my advice for other start-up CEOs:
  Be as transparent and as communicative as possible. Share everything you know and ask for feedback from everyone.
• Plan for every possible business and emergency scenario. Operate with urgency on things like ratcheting back investments so that you have options down the road if the market downturn gets worse and/or goes on for longer than expected. This way, as the situation changes, there’s a playbook in place based on various scenario plans with associated operational KPIs and business gates that allows us to execute collectively versus thrashing in times of high emotion.
• Now is the time to lead with empathy, compassion and conviction. This is the time that your employees, customers, shareholders and community need resilient and decisive leaders. Challenging moments such as these will help further galvanize a strong culture and a focused team, if done right.

Jesse Levin, CEO of Brightfield

Brightfield is a workforce analytics company that helps the Global 2000 design their workforce precisely right.

8 Lessons to Survive, and Thrive, During Difficult Times:

1. Double Down on the Core and Tighten Execution. There is always more return here than you think through short-intensive, campaign-level focus across functions. By tightening execution and focusing on your core product, you’ll be able to boost collaboration and engagement amongst teams and colleagues. Use the recession to kill any zombie projects or products that may represent recurring revenue.
2. Everyone Is a Customer. Figure out ways not to let short-term economics get in the way of the immediate ability to be useful to segments of your market that may be non-viable in the short-term. For example, in software products where the marginal cost of use is near zero, figure out if there are ways to provide trial usage (if you’ve verified it’s with the true economic buyer). Customers and prospects remember who invested in them at the bottom of a cycle and, in my experience, do find ways to balance the karma scales (at least in the short run) when the market comes back.
3. Focus on Cash Not Cost. Suddenly, cost savings are urgent again, which is great for companies with a tangible value proposition with hard-dollar savings measures. That said, remember that while cost is nice, cash rules. So, push hard to determine how features of your product/service don’t just support forward cost avoidance but can actually enable immediate cash realization.
4. Ensure Your Leaders Are Comfortable with Imposter Syndrome. The pandemic recession has some attributes that are similar to past cycles, many that are not. Thus, your leaders must exhibit confidence and clarity even when they don’t know what’s next. Great leaders show their true colors by getting better when the moment calls and that’s where we are right now.
5. Blur the Lines Between Service and Software. If you don’t provide a mission-critical product to the enterprise, then figure how to be mission critical. Crisis environments are not the time to teach customers about your business model. This isn’t a time to be shiny and new, it’s a time to be trustworthy and functional.
6. Convert Your Workforce Mix. What’s different about this recession than those of the past is that the percentage of the workforce that “matters” that is on contract (i.e., not a FTE) is 40%, on average, and, in many companies at or above 50% (e.g., Google, Microsoft, Cisco, etc.). Often these roles are more expensive on a bill-rate basis, but may be longer-tenured than many of your full time employees and are working on more strategic projects. Where that individual may have preferred contract work in the past due to the possibility of a larger paycheck for the next gig, companies have the opportunity to save 20 – 70 percent on a dollar basis by converting the contractor to an employee. In reality, companies may not only get better savings but more productivity from that team member.
7. Boring is Beautiful. My first company went public in 1999 with a subscription B2B software model before SaaS was a thing. We did our IPO roadshow behind Pets.com. We had this wonderful IPO pitch about recurring revenue, terrific cash flow visibility, wonderful negative working capital attributes and so on. No one cared. All they wanted to know was what our “eyeball acquisition strategy” looked like. I am sure Pets.com had a great eye ball strategy. But you know who isn’t around anymore? Pets.com.
8. Have a Strong POV for How to Help Customers Accelerate Out of the Turn. This is a once in a generation opportunity for companies to transform processes that they may have not had an excuse to do so. For example, in a supply chain of scarce commodities (say, talent for example), suppliers like staffing firms, independent contractors, consultants and outsourcers may have had a lot of leverage in negotiations. Not now. Many buyers are using this opportunity to reconstruct and focus their supply chains. Now is the time to use buying leverage and shift the balance of power. Depending on what side of the market you are on, be prepared to take advantage of the changing market dynamics to outcompete competitors unwilling to innovate at your pace.

Sudheesh Nair, CEO of ThoughtSpot

ThoughtSpot is a search and AI-driven analytics platform that empowers anyone to explore, analyze, and share data-driven insights instantly and simply.

What is your biggest fear?
On the personal front, I’m similar to everyone else. I fear the impact COVID-19 could have on my family and loved ones. As a CEO, however, fear is not the emotion I’m feeling now. I’ve been through downturns before. While a major economic downturn is damaging, strong companies come out on the other side stronger than before. I’m focused now on making ThoughtSpot one of those companies by taking any slowdown as an opportunity to pay down our debt. I’m not talking literal debt, but instead, technical debt, sales debt or culture debt. Too often, leaders can’t stop the momentum of the company to address it.

Think of it like a traffic jam. If everyone is in gridlock and the ETA is 90 minutes before you can get moving again, you can either stay in your car, or pull over, get out and have a meal so you’re refreshed and ready for the rest of the drive. COVID-19 provides the same opportunity for businesses to slow down and adjust the course.

Did you go through the 2001 and 2018 crashes? What lessons did you learn?
I went through both. In 2001, I was an entry-level employee and in 2008, I was a mid-level manager. In both cases, I found executive teams following the same formula: go into a dark room, make major decisions opaquely and then communicate them in perfect, marketing approved communications. The problem was nothing was believable. It was too polished, and no one had insight into the process.

I knew if I ever had to lead a company through a crisis like I am today, transparent, authentic and frequent communications would be critical. Your team needs to know more than just what decision was made, they need to know how a decision was made. And they need the opportunity to understand this not just once a month, but on an ongoing basis as the situation evolves.

What piece of advice is resonating with you now as the crisis intensifies?
“Grant me the serenity to accept the things I cannot change, courage to change the things I can and wisdom to know the difference.” This quote from theologian and ethicist Reinhold Niebuhr is more relevant now than ever. The first two points around acceptance and courage are obvious, but it’s the last point that resonates with me the most. We need to understand there are some things we cannot change during the COVID-19 crisis, and in that understanding, we can find some modicum of peace.

You are a CRO who just closed an excellent 2019, had an energizing sales kickoff that aligned everyone around a strong strategy, and your first quarter is shaping up to be another record quarter. Then COVID-19 hits. Your teams have to quickly move to a distributed work environment, travel comes to a screeching halt, and all deals now have to be closed virtually. These changes have not only impacted how teams work together but have also critically affected customer purchasing habits and priorities.

At Sapphire Ventures, we know none of us alone will have all the answers to this challenge, so we have been hosting CRO forums to discuss what’s been working and what hasn’t for CROs and their teams. While CROs’ response to this crisis will continue to evolve, we wanted to share what we’ve been hearing and advising to-date. Here are some measures that CROs may want to consider now to incentivize prospects, overcome objections, engage customers with empathy and build confidence around your revenue process. 

1. Realign Your Sales Team

Unquestionably, you should focus on any customers who are experiencing time-sensitive pains from this crisis that your specific technology can help address. Outside of those potential customers, it is wise to assess the impacts of this current pandemic. In a spin on William Gibson’s infamous quote; this crisis is already here- it’s just not very evenly distributed. Unlike previous recessions, where all industries were negatively impacted to varying degrees, the current recession has created outsized tailwinds and headwinds for certain industries. For example, grocers, CPG, telecommunication, gaming, and media companies are all experiencing a surge in business. Other industries such as hospitality, energy, financial services, and retail have been severely negatively impacted.

It behooves you and your company to be cognizant of this fact and adjust your sales segmentation accordingly. While you shouldn’t completely write off an industry, you also don’t want a salesperson repeatedly contacting a prospect that is in no position to have a meaningful or relevant conversation right now. You risk both having your company look tone-deaf and your salesperson burning out. Rally around your existing customers in the industries that have been negatively impacted by this crisis, but think about reassigning a portion of your sales team to industries that are experiencing a boon from the change in economic activity. 

2. Adjust Your Messaging

What resonated with a prospect only a month ago may no longer work. At Sapphire, we have reached out to our CIO network to get their feedback, and it’s clear that recent events have shifted their businesses’ focus, attention, and time. More importantly, people are being impacted on a personal level on one of Maslow’s most basic needs–health. 

Coach your sales team to engage with empathy and acknowledge the fact that we are not operating in a business as usual environment. Realize what initiatives and drivers may be a priority today for your prospective customers. Drivers such as business continuity, efficiency, user simplicity, collaboration, and productivity have taken a front seat at many companies. As a member of our CIO network has noted even now in the downturn, “Money will flow to business and IT pain points.” Identify how your solution helps to support these priorities and focus on establishing your messaging around these new areas of critical needs for your customer. For example, as most companies have been thrust into a distributed work environment, you may want to discuss how your solution enables collaboration, provides a single view of the truth, and also emphasize its simple implementation and user-friendly design. 

Another good idea is to take the time to build objection documents for your field teams. Record every objection they are hearing from customers. Then, work with your sales enablement team to create thoughtful responses that your sales team can utilize in these scenarios.

3. Double Down on Existing Customers

While it may be challenging and time-consuming to engage with new prospects today, you and your team should pay particular attention to existing customers. To preserve your existing ARR, it’s paramount that these customers do not churn. The only thing worse than not booking new business is losing existing business. Lean on your customer success team heavily to make sure your customers are maximizing the full benefit of your solution and empower them to partner with your sales team to engage in expansion opportunities. 

As my colleague Jai noted in his recent blog, this is also an excellent time to listen to your customers on potential product features they have been asking for, but you haven’t had the chance to attend to. By doing so, you can build product features that continue to differentiate your company from your competitors, expand your offering, and improve customer satisfaction. 

These efforts will not only help to preserve ARR, but prepare your company to come out of the downturn stronger.

4. Keep Prospects Engaged

While sales teams are always hoping to drive adoption, they should be adjusting their messaging from “here is why you should buy solution xyz” to also “let me educate you on how we can help even if you are not ready to buy today”. It’s about building a relationship as a trusted advisor and helping prospects become smarter about the space your company operates in until this period passes.

To do so, think about lightening or removing approval processes for your sales team to engage in activities such as trials, POCs, educational workshops, or complimentary assessments, so that they can respond quickly with a compelling opportunity if they receive an objection. For more information and tips on how to increase your success rates on POCs, you can read the blog we published on this topic here.

The key is to keep prospects engaged such that when this crisis subsides, you have a robust pipeline of prospects who are already educated on the space you operate in and are ready to have meaningful sales discussions.

5. Be Flexible, But Know Your Value 

The new reality we live in most likely means budgets may be eliminated or severely constrained at some companies. It’s important to work with your prospects and existing customers to make sure they can find ways to add or retain your solution. For those industries and companies that are most impacted, you may want to look at one-time discounting, spreading payments out quarterly or monthly, or deferring payments. These decisions need to be made carefully and with alignment from your executive team, but being flexible with your customer now could pay dividends later. 

This does not mean automatically caving to your customer’s price discount requests (especially if it’s a company that has not been as negatively impacted). It’s important to understand your solution’s value and rationalize your price accordingly. You may want to consider pricing your solution against business value delivered (i.e. increased productivity, active users, key metrics, business results). In these scenarios, customers only get billed for their rate of usage of your solution or against predefined business benefits they experience. That sends a strong message to customers that your company is aligned around their success and gives them confidence that they will only be billed for value incurred.

That also goes for your suppliers. If you truly need to, don’t hesitate to ask your suppliers if they can be flexible around your payment terms, so that you can properly manage working capital and navigate this time of uncertainty. 

Great uncertainty undoubtedly causes discomfort for companies and customers alike. However, those CROs who choose to use this ambiguity as an opportunity to evolve their GTM motion, expand their product offering, strengthen customer relationships and educate prospects will be better able to navigate these current choppy seas and emerge even stronger.

For many in the U.S., we are in the middle of our fourth week of sheltering in place as COVID-19 continues to spread throughout communities. While the health and safety of society is top priority, the shutting down of nonessential businesses all over the country has caused an economic slowdown with nearly 10 million people filing for unemployment as we write this.

For many start-ups, managing cash burn is critical to coming out of this crisis intact. With that, comes the unfortunate reality of cutting spend across all areas of the business, including employees. It saddens us to write about the reduction in force, but we feel that it’s our responsibility to share how we’re thinking about this difficult topic and what we are advising our portfolio companies.

At Sapphire Ventures, our goal isn’t to provide a detailed playbook on how to handle letting people go with this post. Others have done that quite well already. Our objective is to suggest some options to avoid or delay layoffs, share what we think are the most important considerations when letting people go and offer strategies to stabilize the existing workforce.

Options to Avoid or Delay Layoffs

Every company is experiencing the financial impact of COVID-19 differently. Some are booming if they’re fortunate to be in a relevant sector, while others are severely struggling (pet care startup Rover laid off 41% of its workforce last week). For those companies that aren’t doing well, but have flexibility, we suggest considering these alternatives, in no particular order, before taking the unpleasant step of letting people go:

-Freeze hiring
-Put bonuses and annual merit increases on hold
-Request rent furloughs
-Ask for vendor payment extensions
-Cut travel, meal, holiday party and all unnecessary spend
-Reduce CEO and executive pay
-Implement company-wide pay cuts
-Consider furloughing employees in locations where health benefits won’t be impacted

Guidance On Letting People Go

If you’re at this point, you’ve tried everything to keep your business moving forward without having to let people go. There is no pleasant way to lay people off. It’s a heartbreaking and deeply personal experience for those that are let go. But there is an elegant way to approach the situation and to ensure that it’s a reflection of your culture. And while every company’s culture is unique, we suggest following these best practices:

• Do what it takes to keep the “muscle.” You’ve likely heard the saying before: Keep the muscle and trim the fat. This is an important practice during good times and bad, but in the most difficult times, it’s critical. It’s easy to make the wrong decision when determining which individuals or teams to let go, especially if cash is short and you need to move quickly. So make sure that if you’re having to lay people off, you are doing it in areas of the business that won’t be detrimental to your company’s survival, and ultimately, recovery. Doing this will require you to be brutally honest with yourself when thinking about functions, departments and individuals who you deem to be “muscle.” It won’t be easy, but you should do whatever it takes to retain these people and teams. Because if you let them go, they’ll be hard to replace or rehire once recovery ensues. 
• Do it all at once. Some companies let their people go in rounds. The intention is the right one–letting go no more than necessary. But the outcome of having to execute another round of layoffs and maybe a third is traumatic for existing employees. We’ve seen this before in our own operating experiences, and the impact is crippling. Employees are constantly worried if they’re next on the chopping block, which has a negative effect on productivity. Let as many people go as you need to in order to ensure that in 18-24 months, your company will be a company of consequence.
• Transparent communication. When start-ups find themselves in a state of financial unrest, it’s the CEO’s responsibility to share the hard truths with employees. We don’t believe that there’s a blueprint on how to communicate with employees, customers and even investors about a downsizing. Do what aligns to your culture, what feels right to you and what you believe will resonate with your stakeholders. But make sure to be intentional, thoughtful and honest. And don’t underestimate the power of transparency–people trust it, they feel included and will better be able to prepare for whatever the outcome may be. Equally important is to regularly communicate with your employees. In other words, one email is far from enough. We’ll talk about this later, but it’s crucial to maintain regular check-ins with existing employees who will be wondering about the health of the business week over week, month over month. 
• Respect employees on the way out. This one is especially hard right now given most employees are remote, and many layoffs will have to happen virtually. That said, following some of the same practices that you would use in person still apply. Make sure conversations are happening one-on-one, have HR join the meeting (via a separate meeting invite) and give people time to process and say good-bye (remember, they’re not being fired). Find a way to make executives available virtually to answer any questions–for affected and unaffected employees. Last but not least, ask yourself how can you help those you’re letting go. We’ve seen one of our start-ups form a services group, which repurposes recruiting and events staff. This new team helps with job searches, offers resume writing guidance, assists in LinkedIn profile building and connects employees who have been let go with companies looking to hire. How you manage this process will influence your employer brand and attractiveness once the economy recovers. 

Strategies to Stabilize the Existing Workforce

Once a start-up has gone through a reduction in force, company culture will inevitably be rattled. The CEO and executives need to take it upon themselves to rebuild it by providing a clear vision for the future and keeping staff motivated. Here are some ways to do that:

• Ongoing employee engagement: Once you’ve communicated to your employees that you’ve had to layoff employees, be sure to regularly communicate with existing ones. Develop a cadence where the CEO communicates with all employees once a week, and make sure that updates on business performance are included. If things aren’t great financially, continue to be honest, but keep employees motivated by sharing customer wins and any positive press. During unsettling times, you can’t go wrong with over-communication–just make sure you’re sharing the bad with the good. Also consider holding virtual Town Halls where you can provide a regular update and open up the floor for Q&A where employees can be heard.

• Provide learning opportunities: Keeping employees energized can be hard during an economic downturn. Providing learning and growth opportunities with stretch projects or cross-functional assignments can help keep employees stimulated. They’ll be able to feel like they’re learning something new and can even see it as an opportunity to grow their career exponentially once the economy bounces back. Another option is to create a gamified approach to projects in order to spur employee interaction and innovation. There’s no reason a hackathon can’t happen in a down economy.

• Lead by example: Great leaders lead by example by demonstrating to others how the work is done and setting the tone for the business. Now is the time to do just that. Openly communicate with your employees and stay calm. Leaders set the emotional tone for their troops. If the leader panics, the troops will panic. In addition, be agile and adapt to change with a good attitude. Find ways to create moments of joy and have a good time together. Show courage, empathy and commitment, and your employees will be more likely to ride out the storm with you. Leading by example also means assuming more than your fair share of pain. If you have to implement company-wide pay cuts, be the kind of leader that takes the greatest hit. We’ve seen some inspiring executives bring their salaries down to zero before considering cutting employee paychecks.

These are without a doubt difficult times, but we are here for you. The Sapphire Ventures Talent team is in constant contact with companies in our portfolio. We’re advising, providing communications best practices and supporting the HR department in any way we can. We’re also keeping a close eye on what positions remain open (see here), and we’re working with those start-ups to ensure employees that no longer have jobs are able to experience a soft landing.