Fund Raising during a Crisis.

Is this the worst time ever to be a media business that is reliant on advertising or live events?


In September 2007 I was part of the small team that launched Shortlist Media, an advertising dependent concept.

A month later Northern Rock was in deep trouble and collapsed early in 2008. Then Bear Stearns and Lehman Bros went down. Advertising ‘collapsed’ but that decline, at around 16%, was not as sudden or as brutal as the current situation.

Our plans that involved spending money were thrown in the bin, we tightened our belts hard, cut our salaries and hoped that the market would turn. As the cash drained out of the account at a horrifyingly rapid rate, I still thought we were done for.

Mike Soutar and I joked that at least we had a good CV excuse for failure – the worst recession in living memory.

Then, to our surprise and relief, the business and the market turned. Far sooner than many had imagined, advertisers started spending again and, two years later, spend was back at the same level that it had been pre-crisis.

Twelve and a half years later, a new generation of early stage media businesses is watching in horror as their cash reserves continue to evaporate, despite cutting and furloughing.

This is particularly true of those exposed to advertising and live events.

Advertising is unlikely to revive until the run up to Christmas. The big drivers of Summer advertising are sport, live events, family movies and holiday spending.

Autumn brings fresh retailer budgets, new car campaigns and product launches. Will companies regain enough confidence to start spending again? Let us hope that the winners from the crisis will be pushing home their advantage through advertising.

Live events face an equally difficult 2020. I will not be going to any big gatherings for the foreseeable future whatever research surveys say. Why take the risk?

Advertising projections for 2020 are guesswork. But, for what it is worth, the Advertising Association is projecting a 17% drop in spend this year – not so different from 2007-8 drop. WPP’s worst case scenario is a drop of 35%.

Mark Read, CEO of WPP, has a global overview and in the first quarter trading statement he commented rather awkwardly:

“We are very cognizant of being ready for a rapid recovery, as we have seen in China, though not back to the levels seen before the pandemic”

Small companies in these two sectors, facing a situation very similar to that which we faced in 2007 have been in touch, so I decided to jot down some thoughts on how to survive.

Forget the valuation you had a year ago

Nobody cares what the value of the business was a year ago unless you also have a time machine to hand.

Put history to one side. Looking back only suggests you are still living in a golden and now irrelevant past.

Do you have one available?

Be Honest

Driving a start-up demands that you sell continuously and put the best spin on everything. But now is a time to stop selling and be brutally honest, particularly to yourself.

The pressures of holding together an early stage business now are enormous but find time to look at the numbers calmly and be as objective as possible.

Can the business really be profitable in the future? Will the returns be enough to justify the additional investment and the risks?

Will you invest your own money? Or cut your salary and eat bread and soup because you still believe the business is a good investment?

The answers may be ‘no’.

But if you still believe, throw everything at it.

Start with the Worst Possible Scenario

Nobody knows what is going to happen. V shaped recession? Nike swoosh shaped? Who knows?

Start with the worst possible scenario you can imagine.

For an advertising funded business, this means almost no revenues until September and then only a trickle. Throw in another shut down perhaps. Spring 2021, almost a year from now, green shoots of recovery emerge.

If you start from there, potential investors will know that you recognise how tough it could be. The bounce back should be more rapid but don’t take it for granted.

How Radical Can You Be?

The government’s furlough scheme is, very generously, an opportunity to carry out a test restructuring of your business, at the government’s expense.

How lean can your business be?

Is there a smaller, sustainable business from which you can rebuild?

Are you a crisis management team?

The team that was great at launching and growing a business may not be the right one to fight the less glamorous battle of scything cost, hunkering down for a few years and rebuilding for better times with all the harsh decisions required along the way.

Are you the right team to go through this crisis or is new DNA required?

Lay out simple, clear goals

Now is the time for simplicity.

You will have cut costs. You will probably have a smaller, leaner business that can no longer fight on multiple fronts.

Simplify the goals that will make the business break even and go beyond. If you can’t see those goals, can the business really succeed?

Consider a Pre-Pack

If you are under pressure from creditors and receivership beckons, there may be the opportunity to reinvent the business as a ‘newco’ through a pre-pack administration.

You will need to work closely with an insolvency practitioner and they are busy people right now.

Interserve and Debenhams have been the most high-profile recent examples going through this process. The equity holders are wiped out but the company keeps trading and the debt is restructured. It can be a relatively light touch process.

It is a chance to reinvent the business and give it a fresh chance to prosper and grow.

A Chance to ‘Take Back Control’?

Many start-ups end up with a very messy shareholding structure – a hotch-potch of debt provider(s) and shareholders with a dog’s breakfast of different rights.

These are exceptional times and debt and shareholders in risky early stage ventures know that they will be taking plenty of pain. It is the flip side of the remarkable returns that they can achieve with success.

This may be the opportunity for the management team to emasculate the debt, re-make the shareholder structure and take back a degree of control that previously seemed impossible.

Then you can get on with building a successful business.