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A few weeks ago, I wrote What I Expect in the Next Few Months in Startupland, in which I mentioned two fundamental forces: Bullwhip Effect and Startup Growth Rates. We are seeing the impact on both in full force today.

A quick refresher on the Bullwhip Effect: “The idea is that small changes in retail demand amplify into big swings up the supply chain.” A few readers asked for examples. Today, it’s hard to dodge them. A barrel of oil cost -$7 last week. Electricity in France was better than free, hitting -€20 per megawatt hour. And coincidentally, beer brewers are suffering the effects of overproduction. These are examples of adverse demand shocks: demand disappearing for energy and liquid courage overnight.

If I start a salacious tweetstorm that our local bank is running out of money, that rumor will circulate quickly. Eventually, the rumor will trigger a bank run. By tomorrow, the bank will face insolvency, even though it was business as usual at the bank this morning.

This is the idea behind Narrative Economics. Robert Shiller wrote Narrative Economics, in which he explores how stories impact the economy. In particular, narratives stoked three depressions and recessions in the US in 1920, 1929, and 2008. Shiller, a respected and lauded professor at Yale, models the spread of narratives in these periods using epidemiology.

Among the most useful frameworks I’ve found to manage a company in this era is the 2×2 matrix above. This matrix answers the question: what should the company’s stance be. It also raises the question: when should it change?

One could argue times like these all good opportunities to adopt a defensive posture: focus on product, limit GTM hiring, and modulate burn. A million saved is a million raised.

On the other hand, one could argue, now is a great time to press competitive advantage, win share, and emerge from this epoch stronger for it. Fortune favors the bold.

Sam Jacobs created the Revenue Collective, a group of more than 1700 sales professionals at some of the fastest-growing companies. With chapters across the US, Revenue Collective has broad reach within the sales community. I’ve known Sam a long time and he’s done remarkable work with this community. Recently, Revenue Collective surveyed its members about the impact of coronavirus on businesses.

The data is insightful both as a tool for benchmarking your own company and also to understand the mentality of sales leaders in this challenging time. You can download the survey here.

Over the last decade, growth has been the winning card for startups to play. The faster the business grew, the higher its valuation. Margins didn’t matter much. Neither gross margin, nor net income margin weighed heavily on a company’s valuation unless they deviated grossly from norms. Today, runway ranks as the first consideration in evaluating a company’s strategy. Suddenly, margins matter.

Richer margins lengthen runway. Let’s illustrate the point with a hypothetical startup at $1M in monthly revenue. Assume the company grows 5% per month. The company generates a gross profit of 60%. The gross profit is the revenue minus the COGs (cost of goods sold).

When will a start up’s management team feel comfortable telling employees there safe to return to work? Is it when the government declares it safe? Or schools re-open? Or customer prospects agree to meet in person? Or when we each record a positive antibody test?

How will we conduct meetings? With masks and gloves? What will be the social norms to say hello? Handshakes, hugs, high-fives, waves, hand over your heart, a bow? Will it be impolite to shake hands and immediately use alcohol to disinfect your hands? Will it be impolite to ask if someone has been tested for coronavirus? Will we carry immunity passports?

Which startup sectors are most affected by coronavirus? Roger Lee is maintaining Layoffs.fyi, which is a table of all the startups who have unfortunately cut staff. On the brighter side, it is a resource for startups looking to hire as they grow.

Over the weekend, I analyzed Roger’s data to answer this question. First, let’s look at layoffs by day.

Before March 23, there wasn’t a meaningful volume. But starting that week, startups began reducing headcount by about 700 per day. On March 23, many states and countries started implementing lockdowns. Friday spike to more than 1800. The following week saw similar patterns with the most volume on Thursday and Friday. However, there doesn’t yet seem to be a daily or weekly increase in the data.

With all the breaking news every hour, I found myself looking for a longer-term perspective on the world. I read a book that fit the bill: Peter Zeihan’s Disunited Nations is a political economy book, a sort of Guns, Germs, and Steel for the future. I wish my economics classes had been taught in Zeihan’s style.

Zeihan structures the book as a series of scorecards for the major countries of the world. These scorecards discuss four main pillars of healthy economies and governments.

What’s going on in Startupland?

Venture rounds are closing. We’ve seen seeds, As, Bs, and growth rounds in the past few weeks. And round announcements continue. Valuations are coming down a bit, but they are all over the map. It’s too early to draw any conclusions about pacing, however.

In fundraising conversations, founders are candid. Founders share the growth story of the business before the onset of the virus, and few of them have the visibility to project end of year performance. Some founders in market today are running dual track processes, choosing between raising capital and pushing toward profitability within a certain time frame. When asked about the decision criteria for selecting a venture partner, one founder replied with a single phrase: speed to close.

I was reading an article in the NY Times about how we’re all using much more internet than we have been. Consequently, YouTube is throttling video quality, and some of our services are slower than before. I’ve also heard anecdotally that some forms of content marketing are doing well in an era when knowledge workers sit before our laptops all day.

I wondered where I could find some interesting data about these patterns. I couldn’t find real-time data about bandwidth, but Google’s Trends product does show near up to date Google queries, which is a good proxy.