How Covid-19 Can Benefit Startups
One could guess that these players backed by Sequoia will still be in the game. Sequoia is currently making investments with an $8 billion fund, which is by far the largest of its competitors. To put it another way, it would be hard to find a Sequoia-funded startup that went out of business because of hunger.
Still, the memo got out there. Sequoia did something similar in 2008 with a public memo called “R.I.P. Good Times,” which summed up the economy and funding at the time. Sequoia didn’t send out another public memo for a whopping twelve years.
One thing about the two memos is the same. There was real fear and panic in every part of the economy. Businesses are spending less, consumers are uncertain.
Since the virus hit Indian shores less than a week ago, startups have reported sharp drops in revenue ranging from 5% to 50%. Travel and hospitality are the industries that are hurt the most.
Most VCs feel like they don’t know what will happen. Most venture capitalists are now taking a “wait and see” approach until the dust settles.
The Pandemic is Also Changing The Way Businesses Buy Products and Services
Face-to-face meetings, events, and conferences were the old way to sell, but they are quickly going out of style and will be replaced by digital and virtual sales.
Big-bang enterprise deals and digital content aren’t the best ways to land and grow sales. Instead, online meetings, virtual demos, and “try before you buy” are much better. Indian B2B and SaaS startups know a lot about all of these things.
Even though some businesses might seem to have the upper hand, a big economic impact is coming and can’t be stopped.
Covid-19 is the last in a long line of time bombs that are still going off.
Oil prices going down, financial institutions like Yes Bank falling apart, growth slowing down, social unrest, and economies going into recession.
Even though the outbreak probably wouldn’t have caused an economic collapse on its own, it could be the last straw that breaks the camel’s back because of everything else that has happened in the last few months.
We talked to some venture capitalists (VCs) and startup founders in India and South East Asia to find out how startups and investors are preparing for Covid-19.
Tough Road For Consumer Startups
People are less likely and less able to spend money on goods and services when there is a lot of fear and uncertainty in the air. Things are even worse because you can’t travel or go out to shop, eat, or have fun.
Reports say that ride-hailing services like Ola and Uber are already losing a third of their business compared to what it was before.
A ride-hailing executive who knows about Uber’s global business says that there may be “signs of recovery” in Hong Kong and Taiwan, two countries that were hit by the virus first.
Startups in the hospitality, entertainment, and travel industries are worried that their sales will drop even more as people stay home and don’t spend money on things that aren’t necessary.
Due to the terrible situation in some parts of China, consumer startups that sell physical goods like furniture and electronics are worried that their supply chains could be delayed in unpredictable ways.
How to Start a Business in an Online World
Businesses have had to change how they connect with customers and reach new people because of the pandemic.
Lee Crockett, who runs the business Lee Crockett Consulting and helps people improve their leadership and careers, says that her original plan for the business was to speak in front of large groups.
“I had plans for my business for a long time before I started it,” she says. “Retreats and in-person workshops were a part of that, but none of that was on the table when I started.”
Her current business plan still involves coaching people one-on-one, coaching groups, and giving speeches. All of them are done online, which is the only difference.
“That’s all I’ve ever known about the business. (Virtual) has helped me get in touch with many more people. Crockett says, “Thanks to COVID, the whole world has become my backyard.”
Talibah Bayles, who started and owns TMB Tax and Financial Services, also had a different idea about what kind of business she would start.
“Since I mostly do taxes and accounting, my clients are used to being able to walk into a storefront and have their taxes done in person.” She came up with a way to run a business that let her do a virtual consultation.
Less Overhead Allows For More Aggressive Marketing
When infrastructure costs are less than expected, new businesses have more money to spend on marketing.
Hurlston says, “Because our payroll was smaller, we were able to use the money that was set aside for payroll.”
He and his business partner changed the money’s purpose and used it to advertise on Google and LinkedIn.
Bayles has also tried to find clients through social media. She says that tax and accounting companies were slowly getting into that before the pandemic.
“I’ve done a lot of market research over the past year, and I’ve noticed that more and more of us are trying to make talking about taxes and accounting fun.”
Even on Instagram, Bayles is putting herself out there. “My Instagram posts have brought me a lot of clients because I do a lot of webinars.”
She has found a media expert to help her with the 10-minute segments of her Instagram webinars.
Always Try New Things
If there is one good thing about the pandemic, it is that businesses have had to come up with new ideas and find creative ways to do business in these unusual times.
Julien Raby started several businesses and is the founder of ThermoGears.com. He was successful because he was always looking for new ways to do things.
He says that coming up with new ideas is one of the best ways to help a new business succeed. “Crisis gives you chances that can turn your game around if you use them right.”
FAQs – How Covid-19 Can Benefit Startups
Almost all of the businesses that temporarily closed because of COVID-19 (43% of the total sample) did so because of COVID-19. Respondents whose businesses had temporarily shut down said that the main reasons were a drop in demand and health concerns among employees. Problems with the supply chain didn’t matter as much.
During the coronavirus pandemic in 2020, 6.0% of companies canceled, 9.7% put off, 8.2% cut, and 1.5% increased some of their planned capital expenditures. 1.7% of businesses spent money on new capital investments that weren’t in their budgets.
Many businesses across the country had trouble with their supply chains, saw less demand for their goods and services, ran out of supplies and inputs, or were forced to close by the government. At the same time, the government set up programs to help keep people on the payroll.