Observations from the Portfolio: Some Best Practices for Honest and Transparent Communications with Boards and Investors during the COVID-19 Crisis


The start-up ecosystem is powered by the potential of great success for companies, and high returns for investors. Entrepreneurs are trained to present opportunities, traction, and results in line with those expectations – yet falling into the trap of needing to appear to “crush it” all the time and give sugar-coated results and projections to please board members and investors can lead to more peril for a company.

Sharing bad news and potential downside scenarios go against many founders’ and entrepreneurs’ basic inclinations – but developing a transparent, constructive dialogue with your stakeholders in these situations is critical for progress and survival. Among the reasons:

  • Stakeholders lose confidence in those who don’t present an understanding of the reality of the current environment.
  • Investors and Boards can’t help the CEOs and management teams of their portfolio companies if they don’t have an accurate picture of their challenges. You built your team to help you. Use it.
  • When crafted with stakeholder input, thoughtful plans can help investors and boards stay engaged and even increase their support of a company.

At Ben Franklin, working with a large portfolio of companies has given us the opportunity of seeing how many different CEOs and managers communicate the effects of COVID-19 on their business. We know that our best entrepreneurial managers have presented the challenges and risks that their businesses face in a very real and unfiltered way; that presenting negative market dynamics, risks, and potential losses do not make them failures as managers and entrepreneurs, but rather mature and more trusted ones.

Some of the common themes we see from the communications of our most experienced and successful portfolio CEOs to their Board and Investors include:

  1. Revisions to past financial projections and downside scenario analysis: Yes, it may finally be time to lose the hockey stick and to stop making projections that exceed the overall size of the total market. Showing your Board and investors that you have a grasp of your numbers, assumptions, and potential impacts of a crisis on your customers, burn, and runway (no matter how bleak) gives them confidence that you have a handle on the situation, know your business well, and have been thinking about what you need to accomplish to survive and thrive in the future. Our best managers show where the gaps are, what is needed to fill them, and present scenarios for what happens if they lose 10, 25, or even 50 percent of their customers and pipeline. Many assume they may not be able to raise additional capital for at least one year or more and they show what it would take to cut their burn enough to operate in break-even mode indefinitely. If they need to raise additional capital, they propose terms and valuations that reflect current conditions.
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  3. Your plan to execute on customer success: A crisis is a good time to hug your customers. Even though market realities may be putting pressure on companies’ customers to push out engagements,

    renegotiate contract terms, defer payments, or simply try to get out of signed engagements entirely, the best companies still find a way to show love and loyalty to their customers and they build plans to ensure this. We see our best companies acknowledge that they will likely lose customers, but they also put in place plans to increase customer service to their best customers, work out payment terms and provide the understanding and engagement to hold onto them. This can build loyalty with their customer base and provides a viable path for revenue to bounce back when the market returns.

  4. Outlining cost reductions: This can often be the most difficult plan for a CEO to draft and communicate to stakeholders. No one likes to cut costs and headcount, yet if there is not going to be revenue or capital to cover certain positions, travel, perks, bonuses, etc. from past plans in different times, they must be taken out. The best CEOs identify quickly what can be removed from the budget, which members of their team are indispensable, and a plan to incentivize and retain their best talent and how they might use combinations of layoff, furloughs, and salary cuts to right-size their team. The best propose to conduct layoffs in an ethical and humane way, keeping their company’s values at the core of the process.
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  6. Analysis of how changed market and sector dynamics will affect the business: The COVID-19 crisis has affected some markets more than others. Some companies in life sciences, distance learning, delivery, and telemedicine, among others, may even be experiencing a boom. Yet, as is readily apparent, many markets – such as hospitality, restaurant, retail, travel and others – are experiencing an immediate and almost complete halt to their business with an uncertain future. CEOs operating companies in those affected spaces show that the going is going to be rough for a while, and focus on how they will survive and best position themselves for the recovery when it happens.
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  8. A plan to pivot if necessary: Some of our CEOs have taken the opportunity to show innovative ways in which their current lines of products and offerings can be applied in different markets and industries. If a start-up’s market is currently getting hammered with no change in sight, a pivot may be the only strategy moving forward. It is imperative that the plan around the pivot is credible and within the realm of possibilities given the companies products and capabilities. Although it may be scary or seem desperate, if a CEO presents a solid plan for apivot to their Board and Investors, they could actually build confidence. Boards and Investors like early stage CEOs who are scrappy, innovative, and adaptive.

There are a lot of great quotes out there drawing attention to the merits of overcoming adversity that are more top of mind these days – for instance: “That which does not kill me, makes me stronger,” or “one who gains strength by overcoming obstacles possesses the only strength which can overcome adversity.” This advice is wise and rings true, but is predicated on being honest and transparent from the start about the challenges you face, whether in the start-up CEO world or otherwise.

We’ve been in awe of the courage and strength our portfolio CEOs and management teams have shown in dealing with the COVID-19 crisis so far. All will come out stronger if they can face the risks with openness, transparency and eyes wide open as they work together with their stakeholders.