Actions for COVID-19 crisis management
with our portfolio
We are working closely with each of our portfolio companies to help them tide over these tough times. Here are key areas that we are actively engaging with them on:
Accounts Receivables (AR): Many of our portfolio companies run B2B businesses. One of the biggest challenges for these companies is collections with typical DSOs between 45 – 70 days. We have instituted multiple practices to collect on a war footing and bring down AR on an immediate basis.
- For e.g. 5C Network runs a daily war room to track AR. Sales and collections teams work in tandem to collect from a prioritized list of top customers across DSO buckets (<30,30-60, 60-90, 90-180, >180).
- Leverage smart tools like TimePay that help with intelligent AR tracking and collections
- Revise payment terms especially with new contracts. For e.g. only allow advance payments for business lower than a minimum ticket size (<10K INR).
- Creative billing approaches. For e.g. Awign is implementing a ‘Pay as you go’ model where their customers can recharge the amount in an escrow and amount per task gets remitted when the task gets approved. They are also shifting to more frequent billing cycles from current 30 day cycles to 7 day cycles hence helping cash flow.
Accounts Payables (AP), other liabilities: Heavily encourage deferring payments to partners/vendors etc.
- Conserve. Conserve. Conserve – Clear AP only when corresponding AR is cleared.
- Negotiate and defer payments to direct supply partners, helping smoothen cash flows in the near term.
With each company we have reviewed every item of fixed costs, rationalized each and then decided to either defer or cut expenses to reduce burn and hence increase runway.
- No discretionary spending. For e.g. given that 100% of our companies have moved to WFH, one cost to immediately defer is office rentals. Some of them have also successfully renegotiated this amount.
- Salary costs: In most cases, the largest fixed costs is salaries to employees. These are hard times and especially with companies which have <9 months of worst case runway, founders have to make tough calls, prioritize company survival over saving jobs. While still maintaining the morale of the employees, several companies have brought this down through a combination of layoffs and salary cuts. Some founders are instituting steeper cuts but instead motivating employees through ESOP issuance.
- No hiring unless it directly meaningfully adds to revenues real time.
- Cut marketing expenses. In some cases this expense is expected to come down to minimum, just enough to sustain current demand and operations.
Debt: We have introduced teams to multiple venture debt (Trifecta) and debt (Caspian, Unitus Capital, Other banks) providers to address working capital issues.
Equity funding: Some of our companies are in various stages of raising next rounds of equity capital. Time is of the essence and we are working with these founders to prioritize closing these rounds, being prudent about the terms and singularly focus on getting money in the bank.
It is not doom for all companies. We are working with the founders to relook at their product roadmap for new products and markets that they can unlock.
For e.g. Awign is looking at servicing demand from industries such as food, pharma delivery etc., that are thriving and critical during lockdown. Awign is also leveraging a bunch of use cases like calling, data tagging etc. now enabled because of WFH.
Our portfolio is uniquely positioned to cross leverage market opportunities. In the spirit of generating revenues and leveraging resources smartly, a couple of our portfolio companies are working together and helping each other through the lockdown. For e.g. Awign is tapping into the trained pool of drivers that DriveU has in order to fulfill hyperlocal deliveries for their customers.
Communicate Communicate Communicate
During such times it is critical for portfolio CEOs to over-communicate, to keep the four key stakeholder groups, customers, employees, investors and partners, informed and motivated. Being transparent about the challenges with the business and maintaining trust are critical and we are coaching the CEOs and helping them do this right.