Profiting During a Crisis Is Okay. Profiting From a Crisis Is Not.
A startup investor offers perspective on how to tell the difference
Many startup founders are worried, at this moment, about being a “crisis capitalizer,” a “war profiteer,” an “ambulance chaser.” As an investor in startups, I’ve been thinking about how to offer them a more nuanced perspective by asking: How can businesses tell the difference between adapting to this environment in a healthy way versus taking advantage of others?
The short answer is: It’s okay, even noble, for businesses to thrive right now. Even if your company isn’t on the front lines of health care manufacturing ventilators or delivering essential items like groceries, your company is helping to keep people employed. Those employed people return as consumers buying things to keep the economy going during these very tenuous times. So set your guilt aside.
If you’re thriving in an unnatural way merely due to this crisis or you’re oblivious to the suffering your business may be causing, that’s when it starts to be a problem. For example, we’ve seen some bad behavior from businesses, including price gouging of essential goods and large or cash-heavy companies with access to private capital taking advantage of Paycheck Protection Program (PPP) funds aimed at small businesses.
So many businesses right now are in survival mode, trying to keep as many of their people on payroll as possible. They’re recalibrating their numbers every week, sometimes several times a week, in order to stay alive for as long as possible. Faced with social distancing restrictions, some are adapting: Restaurants are now moving to delivery and curbside pickup, and apparel companies are manufacturing and selling masks. Some are putting on armor: letting go of people so the rest of the company can make it to the other side. And others are gathering arms: borrowing new money, fundraising, and applying for emergency relief loans and grants administered by the government.
I don’t invoke the metaphor of violence lightly — this is, for many businesses, war. Normal business life, no matter how soaring the Braveheart speech your boss gives at the sales retreat, is about modest stakes, like hitting quarterly…
