Survival to revival: Strategies that can help startups during and post the COVID-19 era
COVID-19 has upended life, businesses, nations, and economies around the world. And, the Indian startup ecosystem is undoubtedly one of the most impacted of all.
As per the recent ‘The Startup Pulse Survey’ conducted by Nasscom, a third of Indian startups have seen their revenue declined by more than 80 percent, and over two-thirds of the startups have less than three months runway.
Within the ecosystem, most vulnerable are the startups in the seed phase. In this phase, many startups are either bootstrapped or are funded by friends, family, and other fans, and are often short of money and liquidity. Startups build their products, shape the concepts, establish their network to find potential investors for the next phase.
The ‘valley of death’ is a common term in the startup community, referring to the difficulty of covering the negative cash flow in the early stages of a startup, before its new product or service begins bringing in revenue from real customers.
Whereas, businesses in the growth and the mature stage, relatively have better cash flows and improved liquidity. However, the current pandemic situation has presented unprecedented challenges to the entire startup community, irrespective of which stage they belong.
Here are some of the survival strategies for startups to wither the unprecedented crisis of COVID-19 pandemic:
Track your expenses against the revenue position
Categorise all cost items into essential and non-essential, and extend the runway up to one year and evaluate them against the revenue position. Reassess and revisit your operations plan for all areas that need careful monitoring and design alternatives for key operations. Halt all land, air, and sea travel for the time being.
Don’t press the panic button
Try to convince the existing investor for further investment. If you face liquidity concerns, they will more likely invest, and it will be beneficial for a startup as well, as its investment partner already has skin in the game.
Looking out is also an option despite the perception that there will be a dip in PE/VC funding going forward. Investors will also keep looking for any potential opportunity, and would not shy away in putting equity stake if they see value in the business.
Demonstrate your business acumen and leadership skills by the grit of adaptability and flexibility, and try to offer the investor a business strategy – one that has worked effectively to knock off a storm in the past.
Take a strategic call on your funding rounds
Considering the current scenario, for those startups who are relatively better off in terms of the liquidity concerns, they should wait for other founding rounds to garner a better valuation of their business, once recovery begins.
For example, a promising agritech startup with a major concentration in north and central India, with products ranging from organic eggs production to smart farming, it has pushed its Series A discussion to the next three quarters, and is relooking at revenue and cost closely to ensure its operations are not hampered for the next 12 months.
Revalidate the feasibility of the business model for a “new normal”
Relook at the model, and if need be, look at pivoting it at a fast pace to cater to current restrictions and working format. It will require extraordinary efforts to get the revenue rolling during these times, and all effort should be made to get the revenue engines on the track.
For example, a travel tech startup into hostels and entertainment has put a pause on its expansion plans, and is renegotiating on rentals and salaries on the cost side, and aggressively tying up alternatively for the digital experiences to keep the business running.
Business continuity management and disaster recovery
Prepare a recovery plan for business continuity for the short-term, medium-term, long-term, from worst to best — all possible case scenarios. List out all the potential threats that could affect your business’s operations, and build specific disaster recovery plans.
Strategise, communicate, and act with compassion
Revise sales targets, timelines, and resources, and build a new resumption plan. Have compassion in your communication while taking a tough decision like pay cuts, and in rare circumstances, layoffs.
We have recently seen a slew of mature startups not able to pull out this piece strategically and have earned a lot of negative publicity, which shows the importance of communication in today’s world.
In addition to the above strategies, startups will have to relook at various other things that are specific to their business models, which certainly have to be altered to cater to the “new normal” in the post-COVID-19 era.
The above strategies do not guarantee a sure-shot way of success, but are mandatory to stay afloat during these pandemic times of gargantuan scales, which no startup would have envisaged in their business plans.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)