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Impact of COVID Crisis on Different Industries

“Your job as an entrepreneur is not to predict the next COVID-19. Your job is to predict the fact that things will go wrong.” – Athan Slotkin, AKA The Shadow CEO

Entrepreneurs are problem solvers, they see a sliver of a need not being met and base a startup to bridge that gap. They expect the unexpected. One thing that left everyone running for cover and funds was the sudden lockdown that was imposed worldwide to battle the ongoing pandemic. No one knew how the outbreak of COVID-19 was going to affect the entrepreneur and startup ecosystem.

One of the things that entrepreneurs have to think about is the inevitable fizzling out of their company. Long run planning is the hardest because no one knows what the future holds. There are things that many did not prepare for at the beginning of this year.

The pandemic has hit everyone hard, many have had to lay off employees – unable to meet expenditure, many shut down completely – unable to manage finances, and all of the workforce had to work remotely, one thing that they were not trained for. Some companies were able to stay afloat, pulling out on a flexible framework, while many had difficulties keeping the doors open.

Sectors like health care, cybersecurity and ecommerce saw a hike in their projectiles, while sectors like travel and hospitality fell drastically. One of the reasons for this was the absolute need for these services, they could not be substituted, they could not be rendered obsolete.

And once again Marlow’s hierarchy proved a point in case. Needs like food, sanitation and security cannot be replaced. However the question of factor for form arises. While food is indeed a necessity, the context is incredibly important. While restaurants and fast food centers had closed down for months at end, there was a rise in the demand for raw foods by the general populace. Many started baking their own bread and making food at home.

If you look closely at startups or firms that gracefully survived the close down of the world, you will notice some similarities, somethings that helped them survive the pandemic and the uncertainty it brought with it.

Funding:

Some companies had a run-out stash of cash that was used when funding was withdrawn or investments were put on hold. This helped them in the first few months of the lockdown and gave them breathing space to manage and plan a bit better for the future.

Growth:

Things changed very fast, especially the way the customers interacted with companies and their services or products. The same was the way that founders saw growth projections. It went from growth at any cost to reasonable growth with a margin for profit. The first thing was to be able to sustain the firm and then look for ways to make profit.

Re-align goals:

Customers are fickle in loyalty and in their wants. So firms that realigned their goals to better fit the situation did better in terms of sales. They saw potential when the shutdown happened and moved their service online and tailored their marketing to expand on social platforms.

Adaptability:

The company should be more proactive rather than reactive. Building a working framework is imperative to the structure of the firm. However priorities change through the years and it is important to have a flexible framework that can be adapted to the present requirement. And adaptability should also be extended to products, revenue streams, etc. A diversified revenue stream not only means more revenue, but also more ways of reaching more customers with fundamentally different needs as a result of this crisis.

Healthy workforce:

It is proven through many studies that a certain income threshold keeps employees happier, and this then leads to improvement in work and productivity. A company only grows if their employees grow, both professionally or personally. 

There are various factors that determine the success of a startup. Unfortunately there is no hard-and-fast rule or a formula. Some things work and some things don’t, it’s up to the founder to see which things are worth following through and which are better to be left as is.

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How did the outbreak of COVID-19 affect the startup ecosystem?

At the start of the covid lockdown, there were many who expected that the startups might come to a grinding halt or even that they might wither out completely. Many were concerned about the unwinding of companies that was due to happen. A few months in, many of those people changed their tune. The pandemic had an unexpected impact on the business and the working culture, in ways no one thought possible.

Many firms did not have policies in place for such an event and many didn’t prepare well. All work and operations came to a screeching halt at the start of the year and by mid-summer they did not have enough money to proceed. Whereas the workforce was forced into their homes and remote operations commenced. There was a lot of disruption in communication and in the sudden changes of firm processes. Employees were not trained to work remotely and the workload increased as there was not enough online expertise to go around.

According to a survey conducted by FICCI and the Indian Angel Network called ‘Impact of Covid-19 on Indian Startups’,

  • 22% had cash reserves to meet expenses for 3-6 months
  • 12% had to shut operation
  • 60% operated with disruptions
  • 68% cut down on expenses
  • Almost 30% stated that they might have to lay off employees if the lockdown was extend

There were huge losses in investment and profits. Many had to close certain departments as they could not meet the monetary needs. Most work was out-sourced to companies that specialized in remote work. While many have laid off employees, there are a few who have taken things in stride and slashed their own income to make up for adjustments in their monetary investment instead of letting people off, like Dan Price who is a maverick CEO of Gravity Payments.

However there was a small percentage of startups that profited heavily due to the pandemic by moving and expanding services online. Industries like ecommerce, cybersecurity, SaaS (software as a service), video conferencing platforms and gaming companies saw hikes in their potential projections. Most of these industries had enjoyed growing revenue and loyal customers like the healthcare sector, stood to benefit a stronger balance sheet.

This pandemic is proving to be a strong push in the direction towards the cloud services. The sudden shift in dynamics has proven to be invaluable to many who are learning and preparing for a future in remote work and for those who are tweaking their operations to better suit the current situation.

Sectors like real estate, transportation, physical retail and travel are taking a huge hit both in terms of revenue and growth. Many opting to go virtual, few museums and theatres are putting their service online in hopes of retaining customers and increasing revenue streams from international customers.

This pandemic has closed off a lot of things for new entrepreneurs and budding startups, but it has also opened up so many opportunities for them too. The key is to look for gaps in the trees in a forest and not the trees itself. Profiting in the current situation is very difficult – as is keeping things afloat, but it is not completely impossible as shown by some firms and their workforce.