Lessons Learned by Founders Navigating their Way Through COVID-19

This is the first of a series of posts diving into the ways Real-backed companies are responding to the COVID-19 pandemic.

“Our family was away on spring break. We got back on Sunday and on Monday morning, I spoke to every board member and let them know we were building financial models to prepare for the worst.”

This was how Eamonn O’Rourke, co-founder and CEO of RenoRun, a Montreal-based online platform for construction materials, responded when he realized his company was going from its biggest quarter in history to a complete standstill as a result of the virus. “Q1 this year was like a barn burner,” he said. “We were tracking 20 percent above our target and that was 300 percent up on last year.”

But on March 9th, when his executive team came together to discuss the path forward, they knew the virus would be “a serious distraction”. The question was how serious and for how long?

Innovate and reinvent

These are the questions all leaders have been forced to ask themselves over the past few weeks but for venture-backed startups where rapid growth is the key to continued existence, an interminable pause can mean one of two things: innovate or disappear.

For Locketgo, a startup that provides lockers at live events that people can unlock with a smartphone, the pandemic cleared the path for a new direction that had been considered in the past but put aside. Co-founder and CEO, Gabrielle La Rue, had considered installing lockers in retail stores and other public spaces for delivery pickups but put the idea on hold as they continued to ramp up their live event offerings. But when Montreal’s Bell Centre closed and the reality hit that all of the events they had signed would be cancelled or going online, Gabrielle immediately saw that what had been one of many paths the company could have taken was now indisputably the right choice. With no guarantee that the live events market will revive in 2020, reinvention seemed the only possibility.

“Some of [our partners] had seen it before — putting lockers in the city for last mile delivery — and some of the partners were not quite there,” Gabrielle said. “But [as a result of COVID] now they all see that a locker network in a city that can be used to distribute goods in a zero touch way…now they all see it [has huge potential].”

Like the chef who searches the fridge and pantry to create something new from what’s on hand, Locketgo is using the lockers and tech it already has to create something new — that not only has the potential to help during the crisis but will also address post-COVID behavioural shifts.

Post-pandemic market fit

The key to making it through the crisis, from the perspective of both of these founders, is to think about which behavioural shifts are likely to become cultural norms as we move into the post-COVID world.

“The way we’re looking at it [at RenoRun] is post-pandemic market fit,” Eamonn said. “Everyone’s doing their very best to look into their crystal balls and from what we’re seeing with our user base and from people that we’ve been calling, we think that [behavioural] shift is going to happen a lot quicker from the status quo than anyone might have predicted.”

For RenoRun, the future is already looking hopeful as in the construction industry, social distancing measures can be maintained as operations already begin to ramp back up.

“We’re seeing that there’s still a huge shutdown in the supply chain, so people can’t go to their regular stores,” he says. “We’ve surveyed 600 contractors — half our users, half non-users — and half of them are saying that they want to lean into a service like ours to help them get through the next couple of months. ”

“In terms of product shifts,” he continued, “…there is an inevitability that builders and contractors are going to change the way they order materials. We’re already building tools to make it easier to place larger and larger orders on the platform — this just seems like it’s going to accelerate the whole process for us.”

For Locketgo, future possibilities are much broader. While it’s clear that their locker solution will provide significant savings for retailers by centralizing pick-up points and eliminating failed deliveries, locations for their pilot projects and partnerships with retailers are still up in the air, though they have recently confirmed a first pilot with Arrivage to deliver high-quality non-perishable local products to locker hubs around the city.

“We’re looking for retailers that sell online. Local — small or medium — that want to take goods and put them in the lockers to save on shipping costs, as another option [for customers]… so we’re trying to talk to Ma Zone Québec and Signé Local and maybe even Shopify — all those platforms that have a bunch of retailers and would want to work with us on this — we want to talk with them.”

Like Eamonn, Gabrielle isn’t just thinking about what will get her company through the crisis but how it will continue to grow and succeed as we enter into a new normal.

“The future is bright. I think the future is brighter than it was…” she said. “There’s so many different use cases and I think if we can solve the failed delivery use case, that’s going to be a big one. But the biggest pain [point] is the high costs for carriers and retailers. Locketgo addresses this and will become the necessity as e-commerce volume grows.”

Steps to mitigate pain through the crisis

Despite their current positive trajectories, neither RenoRun nor Locketgo had an easy time in the initial weeks of COVID-19. Both companies were forced to make cuts to their headcount, as like so many other startups, they needed to significantly reduce their burn rates. This meant furloughs and layoffs for both companies as well as salary cuts for executives.

Cutting teams and salaries

For Eamonn’s team of 115 at RenoRun, the process of reducing burn rate by decreasing their team was a matter of prioritization but still incredibly hard.

“Once the CERB plan was announced, we furloughed all the frontline staff, so they’re still technically on the books — we just give them zero hours and the government is taking care of them,” he said. ”And then we laid off 10 percent of our office staff and it was really ruthless prioritization on a role-by-role basis all around ramping back up.”

“Our goal right now is to get back to pre-COVID numbers so I asked ‘What are the capabilities and roles in the company we 110% need to hit that revenue target the fastest?’ And if you weren’t on that list, unfortunately, that’s how we decided to make the layoffs,” he continued.

Despite the pain of reducing the office staff by 10 percent, the team received the news with surprising grace and positivity.

“It was surprising,” Eamonn said, “The people that we laid off thanked us during the process. That’s just not something you would expect.”

He attributes this positive outcome to the transparency he and his executive team displayed in terms of how they made the decisions about how they were navigating the crisis.

“Our executive team took a pay cut, so we announced that pretty quickly to the rest of the company. After the layoffs, we expected to see a bit of a morale dip, but we had an all-hands [meeting] the same day we made the announcements and there was an outpouring of messages from the rest of the folks saying that they really valued how transparent we were around the whole thing — the executives taking a pay cut, how we decided on who stayed and who went — I think it’s helped keep morale at a certain level.”

“We’re just being really open and transparent, having those conversations quickly and moving swiftly and decisively, I think really helped with morale,” he continued. “We’re not going to have another round of layoffs. We’ve forecasted for almost no revenue for six months. We built out this plan that if we don’t bring in another dollar for six months, we won’t have to get rid of anybody else in the company and I think that was huge. Everyone feels a little uncertain about what’s going on so being able to say, ‘Hey, this is the one and only time we’re going to do this and nobody needs to worry’ was really important.”

For Gabrielle’s team of 15, the circumstances were very different but likewise received positively.

“At first, I told everybody to stop coming to the office and we’ll figure [it] out for salary,” Gabrielle said. “But a week after, I said to everybody, ‘I cannot pay you anymore.’ I felt really bad and I told them, ‘If you want to leave, I get it but I want you to stay so as soon as there is help from the government, we’re going to rehire you — and I’ll give stock options to everybody who stays.’

The whole team chose to stay and is continuing to work while receiving government benefits.

”I think we succeeded in building a good culture and a good vision so that’s why they’re staying,” Gabrielle continued. “I told them if there was something to let me know — to please tell me if you need more money or something… we’re trying to figure it out on a daily basis.”

“Before I did [the pivot], I asked myself if I wanted to keep doing this — honestly — because if I was going to convince everybody to follow me on this journey, I had to really believe in it. I took some time off but I really do believe in it, so now we’re doing it a million percent.”

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