As the novel coronavirus pandemic swept across the globe, entrepreneurs and founders found themselves in an unprecedented situation. The longest bull market on record suddenly slipped away, and thousands of jobs were lost as social distancing measures forced businesses to reevaluate their strategy and operations. This week, former Cisco Chairman and CEO John Chambers, who led the company through the dot-com bubble and the financial crisis, shared his playbook on leading through a crisis, emphasizing the importance of communication and culture.
Chambers detailed the lessons he has learned from the successes and failures throughout his extensive career in a new Nasdaq Entrepreneurial Center town hall, hosted by Jeff Thomas, senior vice president and head of Western U.S. Listings and Capital Markets at Nasdaq. Now, as founder and CEO of the purpose-driven venture firm JC2 Ventures, Chambers is using his expertise to help disruptive startups survive COVID-19 and continue to build and scale.
In a period of crisis, communication and culture are actually as important, or even more important, than the strategy and vision of the leadership team.John Chambers, Founder and CEO, JC2 Ventures
The former chairman turned venture capitalist reflected on crises he has managed through, including the Asian financial crisis and dot-com bubble. During the Asian financial crisis, Chambers’ doubled down on Cisco’s investments in Asia, and 18 months later, the company was “number one in every Asian country, and we never lost track of that.” The dot-com bubble, however, was a “humbling” experience for Chambers, who admitted that he didn’t see it coming. In 2001, as nearly 50% of the venture-backed high-tech startups disappeared, so did many of Cisco’s high-tech customers, forcing him to lay off employees and restructure the company’s outlook.
Drawing upon these experiences, Chambers stressed the importance of setting specific goals with a timeframe and regularly reporting to employees, shareholders and customers as a means to increase transparency and trust.
“We did that every time at Cisco – and we didn’t do things perfectly; I was surprised a couple of times, and a couple of times we saw it coming. But we came out of every downturn with a much stronger position in the industry and, candidly, each time pulled away from our competitors, many of which got left behind during the downturn,” Chambers said.
Chambers recommended that CEOs and founders consider a handful of platforms or programs that the company can utilize to deal with arising challenges, which he noted often involve cash, expenses, customer engagement, as well as connecting to employees and partners. He also suggested that one or two of the platforms should be geared toward the future, “where you’re dreaming about what’s possible – new areas that you want to go into with very limited resources.”
Still, Chambers said he is “realistic about what the current challenges will be for startups,” estimating that 35% to 40% of VC-backed startups will not make it through COVID-19. The successful startups will handle the challenges presented by the pandemic, transition to the way the market is moving, and position themselves to scale and grow out of this crisis, he said.
When making the transition, Chambers said entrepreneurs should have a “sliding scale” with the understanding that it may be “as long as three to five quarters before you start to see dramatic growth again, depending on the company.” During this period, startups should be conservative on expenses. He said most VCs are encouraging or recommending portfolio companies to have about 24 months of cash at their disposal based on their current run rates.
“You have to be able to weather the storm if it gets tougher before it gets better,” Chambers said.
Despite the uncertainty surrounding COVID-19, he believes the next couple of months “are looking reasonable.” Chambers has noticed that many startups have seen an increase in activity from their customers.
“If there is one premise that you keep in place as you go through this crisis: put your customer first, your employees second and your culture third,” Chambers said. “And remember your currency in the result is about your track record, relationships and trust.”
He also challenged today’s entrepreneurs to push the boundaries of what’s possible and dare to make dreams come true.
“Dream what’s possible; do it financially very conservative, and take risks now to go for it,” Chambers concluded. “You’re the future of this nation. I think you’re the future of all job creation. I think you’re the economic engine for innovation and the future of our country.”