This experience entailed a massive mind-shift from “growth at all costs” to “cash runway and certainty is King.” We are now far more focused and as a result we’ve become tremendously more efficient.
- I took the philosophical decision early on to act like a more conservative CEO, to protect the long term survival of the business.
- We had to build a plan that had sufficient room for mistakes and uncertainty.
- Now it’s all about focus and now I recognise that being more focused isn’t just a factor to survive, but potentially a factor for us to win even bigger as we come out of this.
- What has definitely happened is that the whole market has aligned in the short term around priorities of cost reduction or efficiency.
- But long term there are some very important trends that will be accelerated.
The Coronavirus crisis has exposed the fragilities inherent in many businesses. But for some startups this crisis is also an opportunity for rapidly accelerated change and change is something the best tech founders thrive on. In this one-off series, Reimagining, Notion Capital explores the personal founder stories behind some of Europe’s leading SaaS companies as they move from rescuing their businesses to rebounding and ultimately reimagining their journey.
In the fifth episode of our “Reimagining” podcast series Andreas Brenner, the founder and CEO of Avrios, shares his COVID experiences of making the tough calls to build a better future for the business.
Andreas Brenner is the founder of Avrios, the fleet management and automation platform. Andreas founded the business in 2015 and Notion Capital led the Series A in 2017. Before founding Avrios, Andreas co-led a family business called Brenner Group, pioneers in fleet management, and he operated a fleet of 120 vehicles. Brenner Group was very forward thinking in their use of fleet management technology, so Andreas really understands the ins-and-outs of the industry and he’s bringing that experience to the wider world through Avrios.
Obviously, we’re talking about the impact of the Coronavirus crisis on businesses and founders. When and how did you realize the significance of the crisis to you in the business?
I recall the date very well. Once a month, I meet up with a peer group of entrepreneurs and we reflect on our personal and family lives, and on our businesses. Given that I knew this conversation was going to be about Corona, I wrote down my thoughts. When I went back into my records, I found that the 10th of March was the first time I recorded Coronavirus as a business negative. So it must have been before the 10th of March, somewhere between February and March that came to realisation, that, “Oh my gosh, this is going to be big, and it’s going to put our business in trouble!”.
As part of those reflective discussions, I note down my feelings. The words I’d noted were “frustration!” and “Oh no, not again!” And what I meant by this was that over the last five years as we built the business, we have gone through a lot. Looking back, it’s been a joyful and relatively successful journey, but it’s had its fair share of ups and downs, but going into this year I felt like the business was in a very strong position. I felt like a lot of tension had just gotten off of my back. But I told my friends that whenever I go home for more than three days in a row, and I feel like the business is in really good shape, then I tend to get anxious because I feel like something big is about to happen. So for a couple of days I had felt like the business was in a really good place and I was really confident in the team that we had built as well as the market outlook. And then along comes Corona. So I really thought, “Oh my God, why now?!” We had put so much energy into building the business but I immediately understood that this would most likely mean some sort of restructuring, because I had seen our family business go through the 2008 financial crisis. I wasn’t part of the management team at the time but I had a co-driver’s seat. I had looked over my father’s shoulder and talked to him about it. I remember thinking, “This might be the early signs of a new 2008 and it’s not going to be good and it means restructuring.” Of course that meant destroying a lot of the things that I was feeling so good about.
How did you come to terms with the impact of this, and in particular, those changes you needed to make?
I always try to rationalise the decisions I take. This time it was difficult because when I first tried to make sense of the magnitude of this crisis that we were growing into, I had to think through different scenarios. And there was no right or wrong, just a lot of incomplete data. I remember telling an entrepreneur friend that, as entrepreneurs, we’re used to making decisions on 60% certainty, which to the outside already looks like we’re big risk takers, but this time, it was more in the range of 30-40% certainty, which didn’t feel great.
Now of course it all looks a lot clearer, at least for Switzerland and Germany, but definitely not for the rest of the world and, at that time, it was all completely uncertain. Would we go into a complete lockdown? What would be the impact on the economy? All of those things were completely unclear. There was only uncertainty. Ultimately, I felt there was only a philosophical approach to solving this. I did my research and talked to other entrepreneurs. At some point I realised that the fundamental question was whether I wanted to navigate through this crisis – and put the company at risk – or did I want to look like an overly conservative CEO? In other words I was thinking, should I take drastic decisions quickly, and therefore give the company room to breathe and save the remaining jobs? Or do I wait until I have more certain data, but potentially put the company at risk?
I decided that I would rather look like an overly conservative CEO coming out of the crisis, having potentially not leveraged the full opportunity but at least not putting the company at risk. So that’s how I decided philosophically to deal with this. Then it turned into a bit of a ping pong between our board, our investors and our internal team. I have some experienced managers in the team who have been through similar situations, such as the 2008 economic crisis and so I tried to aggregate all different experiences and opinions that were available to me. Then I tried to figure out what a scenario could look like, that all of us could build sufficient confidence in, but that left more room than usual for errors.
Over the last few years, we’d usually build plans that didn’t leave a lot of room for mistakes, whereas I said, “This time we have to scale the business back significantly to make sure we have sufficient cash to navigate in the next few years,” predominantly because it was completely unclear to me whether we would be able to raise cash or not in the future. And the other thing was we had to build a plan that had sufficient room for mistakes and uncertainty. But we just couldn’t plan with the data of the past, we just had to use very young nascent data because the situation both we and the market were in was completely new. None of our historic data could really inform what was going to happen in the next few months. So first, I had to take this philosophical decision, of looking like a conservative CEO. And then I had to build a scenario which strikes the right balance between all of our stakeholders:
- We had to be fair to employees who had all worked hard to build the company;
- We had to be an employer that those who remained in the business, could rely on;
- We had to consider our customers and the promises that had been made to them to be an innovative and fast moving software player to deliver on the promises that we made them; and
- Of course, our investors, who had certain expectations with regards to protecting their interests.
Putting all those constraints together we ran through different scenarios and ultimately settled on one that we all felt comfortable with, at least for a certain period of time. But we were also very clear that things might change quickly, again, and so we had to stay observant, and we would have to potentially adjust the plan again. Fortunately, it doesn’t look like that will be necessary.
Could you talk us through that rescue plan, and in particular, that mind shift from playing to win to playing to survive?
The mind shift changed from “growth at all costs” to “cash runway and certainty is King.” Fortunately, I already knew what this would look like from the family business, which had always been an independent business. Independence from banks and from other investors had always been one of the key principles on which my Dad ran the family business. I’ve been in a business that was independent, so have an idea of what such a business looks like from the inside. I tried to build a transition plan that would help us move from a venture backed, fast-growth business towards independence from future cash needs:
- So how could we get to cash flow positivity quickly?
- How could we improve efficiency in our go to market?
- How could we be more focused in our engineering efforts?
- How can we get more done with less people?
At the same time we had to take into account that everybody was already stressed personally, because of what was happening – we have people with family in countries that are most affected by this crisis. So we had to make sure we took them into account as well. But in short, it was a mind shift from growth to financial independence.
So you’ve gone through that mind shift, you’re moving towards independence. What are you now doing differently?
The short answer is focus.
I’ve read a lot of stories about businesses that probably did too many things at the same time and then, at some point came a critical moment in their existence, they realised they had to focus to survive. And once I got that process going, I felt like I understood that being more focused wasn’t necessarily just a factor to survive, but potentially a factor to win even bigger as we come out of this:
- If we’re more focused on a certain type of customer, that would mean we could build an even better product for them;
- Which translates into a more focused marketing and sales approach; and
- A more focused approach to making those customers even more successful.
We quickly realised that this was our time.
We had always been a tool designed for cost savings; we helped our customers reduce the fleet expenses. We had just gone through the process of having to let go some of our people, people we had recruited and become friends with. It was emotionally very hard to let those people go and we realised that we would prefer every single measure to reduce our costs and increase our efficiency over letting people go. And we realised that we could provide that benefit to our customers, by helping them reduce the operational expenses for their fleets very quickly. That wasn’t so important before the crisis, but it’s really important now. As we re-focused the business, we started realising that with this crisis the whole market was aligning. All of a sudden, the fleet manager was thinking about the same thing as the CEO. They’re all thinking about efficiency, about cost reduction, and they want to avoid letting people go as much as they possibly can. And we realised, “oh my gosh, we have a way to help those people do this.” So this situation might actually be a really strong business opportunity for us in the midterm.
That kind of focus on your customers must also have a very positive focus on the employees?
Yes, correct. Though to be honest, it took some time to evangelise this. I could see it; I had been in sufficient customer conversations and I saw account expansion in Q2. In the middle of Corona, customers had opted to double their spend with us because they really believed in the additional value and efficiency gains that the bigger packages of our product could provide.
At Avrios people who were close to customers saw this and they were the first ones to get excited by the opportunity that was ahead of us. But of course, emotionally they were also all still dragged down, especially by the fact that some of their friends had just been laid off and let go of. That was something to navigate through; we tried to be as fair as possible to people that we let go, supported them in their job search, provided benefits where the government wasn’t providing benefits and so forth. That was one thing we had to keep top of mind. But the other thing was the business opportunity and aligning the company on this.
By now, I would say that probably 60-70% of the company really, really believe that this is an opportunity for us because they’ve seen sufficient data. But then there’s always some people that take more time before they really believe but I expect that over the next couple of months, they’re going to follow suit.
Crisis does create the opportunity for rapid acceleration of change. So I wonder to what extent you’re now reimagining a different future for your business and perhaps for the industry you serve as well?
The fundamental trends haven’t changed, they’ve just been accelerated. So electrification of fleets, the introduction of electric drive trains into corporate fleets, was something that had already been on everybody’s mind. But now, if you are a big company taking a COVID loan from the government, there’s very likely some kind of carbon dioxide reduction target associated with that money. I think the electrification of fleets is going to be accelerated.
Similarly, people have become a lot more aware of the possibilities of remote work, which has been massively accelerated.
In Germany, we still had discussions about “on premise” versus cloud software, which to me as a SaaS entrepreneur was always a bit strange, but we now people see the advantages of cloud software more clearly. So we don’t need to explain that anymore.
I don’t think this crisis has fundamentally changed how people move however. If we look at the usage data of vehicles on our platform, then we do see most companies bouncing back to normal patterns relatively quickly. But I do think it’s changed awareness of the benefits of cloud computing and remote technology and it’s accelerated the drive towards electrification of vehicles.
After electrification, I could envisage companies potentially moving towards more shared models of transportation. Some of them have been negatively impacted by this and we don’t know how long the virus is going to remain a topic which will limit this trend. But from a budget perspective and from a technology perspective, once the COVID virus is over, I would expect the return to shared transportation in a bigger way than we’ve seen it before just because of the awareness of technology and how it can benefit the business. For me the “shared economy” is more uncertain in the near term, but longer term my hypothesis is that that’s going to be accelerated as well. It’s no longer going to take us seven to eight years to get to shared and electric fleets, I think it’s probably going to be in the four to five year range. Now we can see that being integrated into corporate cloud and transportation offerings in a far bigger way.
I don’t think we have fundamentally reimagined where the world is going to go. But I do think we’ve changed the timescale on which we’re going to see those changes. What has definitely happened for us is that the whole market has aligned in the short term and priorities of cost reduction or efficiency.
That is something that has not necessarily been the case for us before, we always had to be really good at discovery to understand each customer’s specific problem. However nowadays it’s become really easy because our customer’s needs are definitely somewhere in the range of business efficiency; that’s definitely top of mind. That’s the emotional button to start the conversation with, before we then go into more detail on the specific customer situation.
Does that acceleration of change impact upon your strategy as well?
Our product team has definitely been more agile in the last three months than ever before, which is something that I’m really excited about. We’ve been able to push certain things out, such as what we call our marketplace. The marketplace allows customers who only manage their fleet through the platform, to take certain actions, for example they can get better tyre offers, fixing the cost, right through a platform. They can run tenders for repair offers through the platform. So that’s something that we shipped very, very quickly because it was closely aligned with the short term value proposition of helping our customers reduce their fleet expenses quickly.
That had been on the roadmap for the second half of the year and we pushed it into March and already it’s become a substantial part of our business plan. We’re expecting seven figure revenues from that this year, which is significant. The other part is that we did rethink the way that customers are buying. We emphasised self service because customers are now remote and buying from iPads, iPhones etc a lot more than they were before. Because of that, we accelerated our move towards a self service distribution model for our customers. Then, in the midterm, we’re in the process of evaluating the push on electrification and it’s very likely we’re going to accelerate that as well.
So how do you now feel about the business and the outlook?
I feel like we’ve reduced the business to a new platform, the Phoenix that rises from the ashes, and I feel very good. I really feel strongly that we’ve quickly aligned as a team. We quickly changed our messaging and our short term value proposition. We’re seeing the go-to-market motion work again, we’re seeing very strong and encouraging rise in NPS and our revenue expansion metrics are stronger than they ever were before. So I think that there are a lot of reasons to be very excited about where we’re going.
At the same time on an absolute basis, we’re less people, so we’re producing less. So I do think we have to revamp the business to also be exciting from a growth perspective, while still being cautious and mindful that growth costs time and money, so we’re taking it step by step. But we’re already becoming a little bit more bullish again on growing faster, though without spending as much as we used to. But regarding the big more stuff, we’ve become tremendously more efficient! I think we’ve learned how to grow much more efficiently. And we’re probably going to see that translate into us beating our revised business plan for the for the next couple of quarters.
So generally I feel really good. We’re more focused and more innovative than we were before.
The last thing is, of course, that some of our employees are still very affected and of course worried about the overall global situation and whether there’ll be a second wave. There are still a lot of things that, as an employer, we have to do for our people and to help them get through this because it’s the biggest crisis of this century. And as much as people are excited again on the surface, that if you dig a little bit deeper, you still see that it isn’t over. We still need to be very mindful of the emotional toll that we’ve all paid by going through this.