A founder who bootstrapped his startup in the worst days of the Great Recession went on to grow the company to over $50 million in funding. Here's his advice for how to keep your business rolling in a big economic downturn.

Michael Laskoff

Michael Laskoff.

• Michael Laskoff used $100,000 in personal savings to self-fund his own startup, a teletherapy platform called AbleTo, and launched 90 days before the historic market crash that signaled the start of the Great Recession in 2008.
• The company has since raised $50 million in funding; Laskoff is the largest individual shareholder of the company and current board member and advisor to several healthtech startups.
• Here's his advice for 2020 startups facing the next global recession: Be driven by your mission and compassionate in how you cut costs.
• If necessary, settle for lower valuations and make up the difference when the economy recovers.
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Great companies - particularly the scrappy ones - survived the Great Recession, and the same can be true for startups now facing the looming global recession as a result of the pandemic, Michael B. Laskoff recently wrote on LinkedIn.

"If you're a healthcare startup, take heart: You have the historic opportunity to help the world overcome COVID-19 and establish the new (and hopefully better normal," he added.

He wrote this post from personal experience, having officially incorporated his startup, AbleTo, on July 1, 2008, three months before the market crashed in 2008. Starting off with $100,000 in personal savings, over the next five years he stretched his own investment and an additional $300,000 from friends and family to grow his teletherapy startup, with the company generating some revenue by 2010.

"That meant going without personal income - living off savings - and sweating over every dollar spent," he told Business Insider.

Things turned around for Laskoff and AbleTo in 2013, when the company was near cash-flow breakeven and an influx of $3 million in Series A funding came from early-stage venture capital firm .406 Ventures to help the business grow faster.

From that first investment until Laskoff transitioned out of leadership in 2015, he successfully raised another $18 million in funding in subsequent Series B and C rounds - for a total of $21 million.

Today, the founder and former CEO of AbleTo is the largest individual shareholder of the company - which went on to raise an additional $36 million in funds with its Series D round, for a total of over $50 million - as well as a board member of Wellth, entrepreneur-in-residence at Weill Cornell Medicine BioVenture eLab, and advisor to several healthtech startups.

Currently, AbleTo has 275 employees, a national network of 700 employed and contracted therapists and behavioral coaches, and partnerships with health plans including Aetna and Blue Cross and Blue Shield of Louisiana, Tennessee, and New Jersey.

Laskoff shared his insights from bootstrapping his startup through the last recession and strategies he has offered the startups he advises on what it will take to get through this expected downturn.

Be driven by your mission, not profits

It was Laskoff's own diagnosis with ADHD in his late thirties that inspired him to create AbleTo.

"The evidence-based therapy for ADHD used to regulate the unwanted impacts of ADHD changed my life for the better," he explained.. "Unfortunately, I quickly came to realize that most people with behavioral health conditions - including depression, anxiety, and stress - were not receiving best-practice treatment," he shared, adding that with AbleTo's remote model, he hoped to make this kind of therapy more widely available.

Laskoff admitted that when the market crashed and he only had $100,000 of his personal investment to help launch the product, he "seriously considered throwing in the towel several times." His wife would remind him that AbleTo wasn't about the money, it was about his desire to help transform behavioral healthcare, something deeply personal to Laskoff given his experiences benefiting from therapy.

"The mission, not the promise of the reward, kept me going," said Laskoff. And that belief helped him find ways to cut costs and keep the business running through the lean years ahead.

Balance the pros and cons of a full-time headcount versus contractors

AbleTo embraced the gig economy from the start since during the company's first four years the business could only afford a handful of full-time employees, explained Laskoff.

"To grow, we relied on consultants and independent contractors, which allowed us to match spending to available cash," said Laskoff. "The downside is that starting and stopping is slow and inefficient."

Laskoff found a balance by outsourcing the technical build of the company's product to programmers in Argentina and by offering compensation to early full-time employees in the form of equity.

Find ways to extend your runway compassionately

Laskoff recommended that entrepreneurs today do what it takes to extend their runway - that is, the amount of time businesses can operate given their current funds and expenses - "to cover costs for at least six months and ideally up to a year."

That may mean having to make some painful decisions in the short term, Laskoff said, noting that startups can do so as "compassionately as possible" by ensuring "clear, consistent, and timely communications" to staff.

There's a reason to address employee concerns right from the start, he added, as "fear of the unknown destroys productivity." While clarity, he pointed out - even if there is bad news to share - can help keep things functioning.

He noted that at this time many companies are looking to make these decisions as equitably as possible. For example, one company he advises is forgoing layoffs by cutting everyone's pay by 20%, and while another he advises has had to furlough some employees, it plans to continue covering the expense of healthcare for affected individuals.

If fundraising, give it your all

By spending less time on sales, product development, and motivating staff and contractors, Laskoff committed 80% of his working hours to seeking out additional capital, meeting with over 80 investors before .406 Ventures funded AbleTo's Series A in 2013.

Unfortunately, he shared, there was no one to hand off this work to, so there simply wasn't "sufficient coverage for all of the day-to-day activities." The positive outcome was, Laskoff noted, that, in the vacuum, some employees "rose to the challenge on their own." At times, however, it meant the company had to move at a slower pace to get things done.

While focusing on fundraising came at the expense of day-to-day management, "had I not invested the time in getting to know the venture community, I doubt that we would have been able to access capital later to fund growth," Laskoff shared.

One area of growth for Laskoff was switching from thinking like a startup founder to an investor. "I focused almost exclusively on my needs - money to fund AbleTo's survival," he shared, something that prevented him from making a compelling case to inventors from the start. "Without realizing it, I had inadvertently cast myself as the classic founder and CEO - someone who can invent but not necessarily manage at scale," he explained.

Laskoff credits learning this lesson to Tom Rodgers, now the managing director of venture capital fund McKesson Ventures. Over a meal of pancakes, Rodgers shared that he believed in AbleTo but wasn't sure Laskoff was the one to run the company, Laskoff recalled, adding that he spent the next few months "brooding" but also focused on how to sell himself as a "manager worthy of investment."

"In effect, it was my desire to prove Tom wrong that changed how I presented myself to venture capital firms," he shared.

Instead of trying to deflect criticism of his startup or appear like he knew everything - habits he realized made him look "obstinate and inflexible," not ideal traits for a startup founder looking for the support of investors - he learned to improve his active listening skills to portray himself as someone capable of leading.

Work with a scrappy mentality

There's an upside to being "scrappy," shared Laskoff.

"You think harder about how you put limited funds to work and abandon dead ends faster. You ignore the theoretical and focus on the practical, like managing cash and learning how to raise money," he said.

For example, AbleTo limited product development to keep costs low. Instead of investing in upgrades to make things easier for employees using the platform, the company used work-arounds - such as manually exporting spreadsheets - to avoid incurring additional development expenses. While time consuming for staff, these manual processes didn't have an impact on the customer experience and allowed the company to spend less in the short term. The tradeoff was creating "technical debt that had to be addressed later," Laskoff noted.

Prioritize the products and projects that provide the most value and let go of the ones that don't

Another hard decision Laskoff had to make was putting a project for ADHD therapy on hold.

"The very first program that we developed was a remote therapy and coaching program to help adults with ADHD, which meant a lot to me personally and seemed to answer a clear market need," he shared. The downside, he learned, was that ADHD patients were less likely to complete the program, something that made proving the model challenginging and member acquisition costly.

"In the end, we had to … focus on more commercially viable behavioral health conditions." he said. The one upside was the team could repurpose most of the programming work.

In 2010, after signing with three national law firms on a product that helped new parents transition back to work after taking family leave, the company demonstrated its first "quantifiable success" with a pilot that helped increase the number of attorneys returning to work. That success helped generate cash flow to keep the company going until 2011, when they signed Aetna as a new partner.

"Once we proved that AbleTo could land, service, and grow major health plan customers, fundraising got a bit easier," Laskoff explained.

Settle for a lower valuation if necessary and plan to make up the difference as the economy recovers

With the bull market in flux, shared Laskoff, that will translate into lower company valuations. That may be challenging for founders to accept, but AbleTo's founder said there's a reason to be optimistic.

"Somewhat undervalued companies may be more attractive to future investors. And companies that survive retain the opportunity to make back the difference later," he said.

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