Bessemer finance leader: You need 2 years of cash to Survive

Veteran CFO Jeff Epstein says it’s time to make a change if you can’t support yourself into 2022.

Try to have two years of cash on hand to survive COVID-19, Bessemer Venture Partners CFO Emeritus Jeff Epstein says. If you can’t come up with that, it’s time to change your plan, the long-time finance executive and former Oracle CFO said last week in a CFO Thought Leader podcast.

“Our advice the first week of the lockdown was, ‘We don’t know how long this is going to last or if there’s going to be a second wave, so you should try to get to two years worth of cash,'” said Epstein, Bessemer’s operating partner. The venture capital firm was an early investor in some of the biggest names in technology, including Pinterest, LinkedIn, Shopify, Yelp, Twillo and Twitch, and today is an early-stage investor in some 90 startups.

Epstein advises CFOs to divide the amount their company is losing each month into their cash and, if it comes out to less than 24, it’s time to call their vendors to get lower prices, stop making discretionary purchases and take a hard look at layoffs.

“The first priority has to be preserving the company,” he said.

If you make pay cuts, offer your employees an equity option in return, so when business returns to something close to normal, they can reap the benefits as a reward for their sacrifice.

“Some of my companies had to take a 20% pay cut for all of their employees,” he said. “Executives took a 30% pay cut. It’ll probably save the companies. We’ve recommended companies give equity to employees who’ve given up cash so if the company does well, they’ll actually make more money over time.”

Epstein also recommends taking advantage of favorable conditions in the stock market to raise capital if your metrics tell a good story. “The stock market’s at an all-time high in spite of COVID and investors are eager to invest and interest rates are low,” he said.

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