The fund, which sent a similar note to founders called “RIP Good Times” during the 2008 financial crisis, has termed Coronavirus as the Black Swan event of 2020.
The fund highlights that many of its portfolio companies are already seeing a drop in business activity in part also hurt by curtailment of travel and cancelled meetings, as well as supply chain disruptions across sectors given the unprecedented lockdown in China. Several are at risk of missing their first-quarter targets, a blog post from the fund said.
“Unfortunately, because of Sequoia’s presence in many regions around the world, we are gaining first-hand knowledge of coronavirus… It will take considerable time — perhaps several quarters — before we can be confident that the virus has been contained. It will take even longer for the global economy to recover its footing,” the fund said in a blog post published on March 6.
I’m not necessarily sure Sequoia is so much suggesting layoffs as it is suggesting to cut back on new hiring plans.
— Dan Primack (@danprimack) 1583444502000
So far, the virus outbreak has spread from China to 80 countries, infecting 95,000 people and killing more than 3,000. It has also doused expectations for a global economic rebound and triggered an unscheduled US. interest rate cut this week, the biggest since the global financial crisis, Reuters reported.
“While The Fed and other central banks can cut interest rates, monetary policy may prove a blunt tool in alleviating the economic ramifications of a global health crisis,” the post said.
The fund has advised its portfolio and the larger startup community to question every assumption about their business, including cash runway, fundraising plans, sales forecast, marketing as well as headcount and overall capital spend.
“Private financings could soften significantly..what would you do if fundraising on attractive terms proves difficult in 2020 and 2021? … anticipate that your customers may revise their spending habits. Deals that seemed certain may not close. Until you have charted a course to financial independence, examine whether your capital spending plans are sensible in a more uncertain environment.,” the post said.
India has 30 reported cases of Covid-19 as of March 6. The government has decided to start universal screening for all passengers flying into the country from abroad for the virus at the airports besides testing people coming in through open borders.
Sequoia’s India portfolio includes Oyo, Byjus, Bounce, Zomato, Rebel Food, and RazorPay among others.