After the recent news of Silicon Valley Bank's failure in the United States, a number of my clients who are running startup universities have become extremely worried and kept reaching out to me frequently.
They wanted to know how this situation could impact their universities and what steps they could take to protect themselves.
They’re right to worry! After all, this is undoubtedly a crisis that makes most of us wonder whether or not it’s safe for startups to invest heavily in U.S based banks. This is especially true for startup universities: it takes several months for state approvals to be granted.
During these long wait times, regulators obviously expect proof of funds in bank accounts. This makes it crucial for young universities to find a way to protect themselves from financial loss.
By the way, in my recent FAQ Video, How Do I Open A University: Three First Steps I discuss the specifics of licensing in more detail. I also have a whole series dedicated to licensing. Don’t forget to check out the first post in this series if you haven’t already.
With that said, I would like to shift my focus back to our main topic and dedicate this post to offering tangible advice and strategies that can help you protect your university startup in the current situation in Silicon Valley or any similar scenario.
Make achieving profits your main focus
Some time ago, it was acceptable to make fast investments to see faster growth. That’s what investors have been doing with brands like WeWork, Uber and Lyft. These became sensational at a later stage, although they weren’t really yielding any profits in the beginning.
Well, the times have changed. Investors don’t longer seem to support startups that only care for growth, but not for the ROIs. The trend now has shifted back to startups making money. That’s what attracts investors.
So if your university startup is making lots of hype, but isn’t promising to bring the dollars, it will be difficult to attract investors.
The opposite is also true: if you have a great business model, it can help you stay afloat and thrive, even if you have no investors.
Watch your spendings
In tough times, it's hard for startup universities to get a lot of funding quickly. This can make it difficult to keep your university alive.
However, you can still make the most of the money you do have. You can do this by looking for capital efficiency, especially during a downturn. This should tell you how to spend the money investors provide and how to operate your university startup best.
Keeping track of your expenses is always important, but during a recession, it's even more important to cut out unnecessary spending to keep your university operations running smoothly. This means having enough money to enhance your institution instead of only paying bills.
Put your employees first
During a financial crisis, companies sometimes cut back on employee perks like free coffee or holiday parties. However, it's important not to forget about your employees’ well-being.
After all, your team, whether they’re faculty or staff, is a great force that could help your university startup to survive a downturn. These people need more than just good leadership and support. They need to feel like they are part of a great plan that they believe in, and a mission they can proudly follow.
This is why, I wholeheartedly believe that it's important to be honest with your employees about the challenges your institution is facing, the obstacles ahead, and how you plan to overcome them. Remember, transparency can go a long way in building trust and keeping your team motivated.
Have the mind of an investor
You read that right. My advice is to adopt the mindset of a seasoned investor, especially during financial downturns.
For instance, when bigger universities are shrinking back, you could take the opportunity to step in and make your mark. Can you hire talented faculty or staff who used to cost a fortune? Can you hire smaller contractors or new technologies that could take your university startup to the next level? Any of these could lead to more money down the road.
Of course, when things aren't going well, some university startups are going to inherently fail. But even though it's tough, I think this is good in the long-term because it establishes healthy competition among academic establishments and ensures academic quality is of the highest standard.
Although it can be difficult, it's important to stay positive. Recessions such as the Silicon Valley Bank crisis don't last forever.
I strongly believe that university startups that have a solid long-term plan and a sound strategy will come out even stronger, in the face of all obstacles.
Have questions? Get in touch with me by scheduling your free consultation today. My team and I have been helping to open universities for years, and we would love to help you, too.