In a March 5th post titled Coronavirus: The Black Swan of 2020, Sequoia Capital confirmed it is already seeing a drop in business activity, disruption of the supply chain and travel curtailment.

The firm’s guidance to  startups is to assess their runway (as future financing might become challenging), reassess sales forecasts, raise return on investment for marketing spend, and assess headcount and capital spending. All business fundamentals need to be looked at once again.

The most striking statement in the post is: “In downturns, revenue and cash levels always fall faster than expenses.”

For startups dependent on venture cash to grow, belt tightening to extend the runway–provided you are not too late and raising this quarter–might make sense. In Crunchbase data, we have not yet seen funding slow down. However, funding rounds announced recently were closed in the past couple of months, with conversations and diligence stretching back to a very different funding climate.

In October 2008 Sequoia’s “RIP Good Times” described by TechCrunch’s Michael Arrington as a “56 Slide Presentation Of Doom” the message was dire with “cuts are a must” and “Get Real or Go Home”.

In the 2008 RIP report, Sequoia claimed the following:

New Realities

• $15 million raised at $100 million post is gone
• Series B/C will be smaller
• Customer uptake will be slower
• Cuts are a must

Need to become cash flow positive

• Increased challenges
• M&A will decrease
• Prices will decrease
• Acquiring entities will favor profitable companies
• IPOs will continue to decrease and take longer

Saying “cuts are a must” might be interpreted as sounding cruel.

In the middle of a health crisis, where people in nonessential industries are mandated to stay home, and with heavy job losses predicted for the travel, hotel and retail industries, getting a new job will be more difficult.

Some jobs are opening up, however. Amazon just announced it is hiring to up to 100,000 new full- and part-time workers in delivery and fulfillment centers to address the crisis.

Investors are aware that in the last downturn, new companies–formed in 2008 and its aftermath in 2009–have become significant technology companies. Those companies include Square, Airbnb, Pinterest, Uber, WhatsApp, Kabbage and Slack. Investors will continue seeking those opportunities, having raised unprecedented funds themselves with no shortage of money to invest. And with valuations likely to be capped, this might just be a good time to invest.

Sequoia signs off with: “Stay healthy, keep your company healthy, and put a dent in the world.”