Lenny Rachitsky: belief

Transcript context

…So number one, don't sugarcoat. So you basically you don't need to share all the feedbacks from all the investors. You can tell them, "Look, I met dozens of investors in the last couple of weeks and they're all saying no." Or we had a signed term sheet and the investor disappeared. Okay, that's fine. It is what it is. Look, the fact that it's ugly, if you don't tell that it's ugly, it's still ugly. And so I would share the essence. And if we have metrics, then what I would like to do is believe that everyone is aware of the metrics, of the key metrics of the company. This is something that in general I would say, "Oh, in the lobby of the office, we should have the key metrics displayed for everyone to understand this is what we stand for, this is how well we are executing anyhow." And so when they will see the numbers drop, they know that the numbers drop. And this is something that I will in general I would say, look, key metrics, they should be shared anyhow. And so in particular during crisis, we should keep on sharing them. Definitely not hiding information. So if you have a major customer leave or investor disappear or we are unable to sign a term sheet. And so this is the highlight, this is the major issue. And the details themselves, it's less critical. Now if people ask, then answer. If someone ask, "Okay, so how many investors have you met?" I'd say no, then start counting, 37, be specific. That's a great answer. I want to come back to something you said that I think is so important but so hard, which is to act fast. If I was a founder, something changes in the market, it's easy to say, "Okay, you need to cut burn, you need go raise money, down round." It's so hard to do, to lay people off, to do all these challenging things for your company. Can you again just help people understand why it's so important to act fast? You talked about optionality goes away. Just like what actually happens there if you don't? So I'll give you an example. So let's say that you are almost run out of cash and you believe that you're going to raise capital in the next two month. And if not, then you run out of cash. One of the things that you might want to do is extend the run rate. One other thing that you might want to do is actually tell the people that we will be running out of cash in two month. And number one, I want you to help me even if we run out of cash because there are good chances that we eventually will be able to raise capital and recover that. And number two, in order to get your support and belief in the company I am going to offer you more equity. So, the more equity is something that I will do twice, once today, once you realize that this is going to be challenging, and then again if we need to ask people to reduce their salary or do something dramatic around that. And the first one is actually preventive action. So you share the know-how, you share the challenges that we are going to face. And you demonstrate generosity not out of you have to, but you demonstrate that. And then you essentially dramatically increase their loyalty and their commitment. And when you will need them, they will be there. So this is one example. The other example is about calculating end of cash. And this is really, really important. So let's say that you have run rate of X month, six month. If you reduce burn by 50% today, then you simply increase your run rate to a year. If you don't do it today and you wait three more month, then you only can do that for the ... so the first three month you burn the same way that you did up until now, and now you reduce that to half, so you have six more month, total of nine month. If you decided today that you need 12 month, and you don't act today, you will never have 12 month. Now, is that the only way to do that? No, it's not the only way, but it's one of the ways that by the way most companies will do. So they will reduce burn rate today in order to extend the run rate. Is that going to be more helpful? Don't know. Really depending on the case. If you had asked me if you reduce the burn rate, increase the run rate, so now you have 12 month to raise new capital, is that going to have higher likelihood of remaining with the current plan and growth and raise capital within six month? I don't know that. But this is exactly the decision that you need to make.…

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