COVID-19 advice for early stage companies

I am sharing some advice from a contact of mine, who put it together for his early stage companies.

The key message is to plan for serious economic disruption on a 12 month + timeframe. This is not a short term problem.

The more companies are able to be creative and flexible in responding to the very difficult times to come, the better their chances.

First, company experiences and planning:

  • The key messages are to conserve cash; to be prudent in your reforecasting; and not to assume extra cash will be available if or when you need it
  • Think hard which sectors your customers are in and what their position will be: will they renew contracts; will they slow down purchases; will they want more? etc
  • Don’t just think about orders, revenues and contracts, think about how your customers and their needs, and their cash position
  • If at all possible work out a plan where you don’t need cash for at least twelve months.  If your window is less than twelve months, who will be the funders?
  • Many funders are expecting capital restrictions.   Some are planning their priorities as to which of their companies are priorities.  Talk to your current funders, particularly if VC
  • Do you need to shift direction to stay alive?   For example in both China and here, some suppliers of alcoholic drinks have used the alcohol for disinfectant
  • What staffing levels are you planning for?    And remember, if you pare right back can you pick up quickly enough when the economy picks up?
  • See below: treat this as a 12 month problem, with depressed markets and liquidity shortage throughout.  Which means you need to think about cash and reforecasting for at least 12 months
  • There is an increased risk of ‘keyman single point of failure’ either because of absence or unfortunately of death. So it is worth checking that key documentation on critical business knowledge and IP etc is updated and accessible, and that there are succession plans
  • There are plenty of other sources for example

Timing of this recession:

  • In simple terms, we may contain the outbreak briefly in 6 weeks (given Wuhan, Italy experience).   But we cannot eradicate it and it will reappear.  We should expect 12 months of disruption.

 Severity of this recession:

  • On the one hand, most of the workforce below 55 is at relatively low risk and normal economic activity can continue
  • On the other hand, it will take months to solve the problem through one or more of herd immunity (it will take 12 months plus to reach the necessary penetrations); or drugs to reduce transmission or inhibit (at least 2 are in trial, Chloroquine and Remdesivir).  Any vaccine is unlikely in under a year.  So social isolation will have to continue for a long time, to protect transmission to the elderly who are at much higher risk
  • This will mean months of serious shutdown in eg the leisure, hospitality and travel sectors as social contact must be minimised throughout, and thus a large increase in jobless.

If nothing else, such months of shutdown will severely and deeply damage say 10% of the economy

  • The effect will be continued negative pressure on the stockmarket: eg large institutions invested in the market need to fund monthly pension payments; selling pressure will continue for a long time
  • And that will continue to mean a liquidity crisis with government and central banks being the funders of last resort


  • There is evidence that summer weather may help, but not enough – evidence or summer weather! – yet to be sure.   A study uploaded to medical pre-print server MedRxiv Monday 16th March plots recorded cases against climate conditions to suggest that there is indeed a significant correlation between outbreaks and the weather. In extreme cold and very hot and wet conditions the virus is “largely absent,” the researchers from Spain, Portugal and Finland wrote, meaning that people in tropical and polar climates are unlikely to see local transmission of cases.
  • Just possibly the 12 months will be less, as so many people have and have had the disease with no symptoms and no test, but that will not limit disruption

The basic data:

  • For now assume 1% of those infected die, 2% need serious hospital care (Imperial assumes 5% minimum, below), for 5 days, and we quickly get to 5,000 ventilator beds for the illness (NHS has only 4103 proper ICU beds in total).   Arguably these are all optimistic
  • That says the NHS could ‘cope’ with 250,000 cases at once, or 50,000 new ones a day
  • If we could manage the numbers to about those levels, through social distancing, in a month we could handle 1.5M cases.  In 2 years we could handle 36M, representing 60% of the population
  • The transmission rate of the illness is variously estimated between about 2 and 3, say 2.3 people infected for each person, without social distancing.   Once 60% get infected, the 2.3x transmission rate falls to below 1 without further social distancing, and then the disease dies away.   But the point is this takes 2 years, in the absence of weather improvements, inhibitor drugs etc.   For the current strategy to work by itself (without weather, inhibitors, vaccine etc) will take 2 years).    We can look on the bright side, maybe, but the planning backdrop should is a downturn of at least a year.

Below summarises some of the mail train I have been party to, edited together for consistency.   It changes daily:

12 March:  A well reasoned article

Bottom line is that if we are on exponential growth curves for Covid-19 in European countries then, the sooner the government enacts social isolation, the sooner we will be off the exponential growth curve, and thus avoid the NHS being overwhelmed.  If we stay on the exponential growth curve for too long, then the hospital system gets overwhelmed as per Northern Italy.  The exponential was estimated to double numbers about every 6 days, if no social isolation.  Gross death rates seen in Wuhan were around 4.5% of infected patients, however there is likely to be considerable underreporting of incidence of the disease given mild symptoms in many and lack of test kits, so actually lower rates.   The UK Government estimated 1%.  The World Health Organisation estimated around 3.4%.

16th March: Imperial College’s article is at and referenced in this article .   It models a lot of scenarios.   The basic starting point is you try to keep the low risk working people working; you restrict disease transmission as best you can through social distancing and isolation of the elderly.  However, it doesn’t model the exact scenario currently considered in the UK.  The bottom line is that the social isolation will have to persist for 12-18 months, with maybe occasional respites, until there is a widely available vaccine.

It must be obvious, but if through isolation you can keep older people away from the virus, then there is a massive saving of resources in the health services (or rather, they will take longer to get overwhelmed).   This is key data from the IC study: it is their assessment of UK risk, hospitalisation and death rates by age.

It is largely consistent with other studies, eg of the cruise ship, of Wuhan, of Northern Italy, but in all these cases there was in effect full social isolation.

The risks become far higher once the health service cannot cope, which partly contributes to the higher death rate in Wuhan.

The current challenge lies between:

  • ‘Clamping down’ on the population to reduce transmission so much that the transmission rate falls to less than one.   As in Wuhan, this takes about a month, mainly because the illness lasts about 2 weeks, and takes 5 to 6 days for symptoms to appear.   The health service can stay, maybe, just in control.  Deaths are few.  But nothing has been done to stamp out Coronavirus and it will recur.
  • Building herd immunity by keeping going as fast as possible, but that will take a year or more and even with optimistic figures, the health service will reach collapse.

The UK is largely adopting the former approach, with social isolation to keep the most vulnerable safer (and away from the health service: an 80+ is 15 times more likely to need critical care than a 35 year old, while trying to keep as much economic activity going among the younger, safer population.

But this does not solve the underlying problem.  Let’s be British and discuss the weather, as it might be the best bet.