Coronavirus: Investors On How Business Would Be Impacted
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The outbreak of the coronavirus disease in India and the subsequent nationwide lockdown has sent businesses across sectors scurrying through to gauge and guard against what is an unprecedented situation.
In an online conference by Entrepreneur India, six individuals in the venture capital space share their thoughts on what this outbreak and subsequent lockdown could mean for start-ups and small businesses, and share tips on wading through the crisis.
Sandeep Murthy, Partner, Lightbox VC
Portfolio Includes: Dunzo, Melorra, Bombay Shirt Company
Evolve Your Product
Calling it an unprecedented situation, Murthy said everyone is currently in uncharted territory when it comes to answering the tough business questions.
“Just based on previous experiences during similar situations where chaos wreaks havoc, you sit back and say there is very little you control, there is very little for you to know how the future is going to progress, so preserving capital, extending run rate, making sure that you are using the time to evolve your product, and improve your customer experience, these are things that are important,” he said.
Murthy added the VC firm has directed its portfolio companies to focus on making sure that the product is differentiated, and use this time to create a better experience.
He said he expects this will also force those in the ecosystem to now focus on growing sustainably rather than go with growth for the sake of it.
Sanjay Swamy, Partner, Prime Venture Partners
Portfolio Includes: MyGate, NiYO, mfine
Cash the Hardest Commodity
“Cash is the hardest commodity right now,” said Swamy. It could mean cutting spends, salaries and somehow ensuring that a majority of the team is retained, he said, adding that everyone should be going with a conservative outlook, which is, having enough money in the bank to get through to at least June next year.
Swamy warned that one other problem which could arise for many businesses is that their customers may also be downsizing and cutting costs, so revenue that was coming in could fall by at least 20-30 per cent and the subsequent ramp-up plans might also slow down.
“What is changing is the behavior of the users...that is becoming the new normal,” he said, reflecting on how this crisis could create plenty of new opportunities.
VS Kannan Sitaram, Venture Partner, Fireside Ventures
Portfolio Includes: Yogabar, boAt, MamaEarth
Advice For Consumer Brands
Bengaluru-based Fireside Ventures focuses solely on companies in the consumer space.
“We really look at three groups of companies in our portfolio, one where the runway has to be extended, we are working with them on how they can conserve cash; in the other bucket, which is where we have the food companies, most of them are falling into what the government is calling essentials; and the third group is products that don’t fall into essentials, we are only talking about largely a deferment of demand - how are you going to reap that, what’s the kind of changes you would see in the environment, and what you are going to do about those changes,” said Sitaram.
Ashish Fafadia, Partner, Blume Ventures
Portfolio Includes: Milkbasket, GreyOrange, Unacademy
Communication Is Key
Fafadia said the vc firm had already been talking to all its portfolio companies, both on a broader level as well as on an individual basis. While acknowledging that the situation would have an impact, especially with B2B companies with several customers also facing the heat, he said the founders had also been told that the lockdown wouldn’t last forever.
“It will come to a point where life resumes, but things will still be slow. Prepare for that phase, it is not going to come back with a thud, you might have to be very, very conservation and fundraise is going to be very difficult as well. This is a time where if you are a funded company, you need to create your own reputation and your brand, and at the same time have the right communication with all the stakeholders on what you are trying to do,” said Fafadia.
One can’t expect business to be usual when things resume, he added.
Anjali Bansal, Founder, Avaana Capital
Portfolio Includes: Delhivery, Urban Company, Nykaa
Innovation Will Survive
Bansal, while also stressing on the importance of conserving cash at this crucial hour, said all their portfolio companies have been asked to prioritize safety of their employees. “Business will happen if life continues,” she said, adding that they had put business continuity plans in all companies they have invested in.
One major point that she pointed out was that companies needed to figure out what they can do to support the government and the people in this dire scenario. Start-ups have as much of a responsibility as big companies, she said.
On a positive note, Bansal said, reflecting on the fact that they invest in innovation-driven businesses, those who survive this crisis would come out stronger, more differentiated and very well-positioned. “Innovation will lead, will survive.
Tej Kapoor, Co-Executive President, Fosun RZ Capital (India and Africa)
Portfolio Includes: Gland Pharma, MakeMyTrip, Kissht
Light At End of Tunnel
Fosun, which has investments across the globe, has already seen some recovery happening in China, according to Kapoor.
“There is light at the end of the tunnel, I don’t think the world is coming to an end but the way we do business is going to change,” he said. Recovery in different regions will take a different amount of time, but companies need to over communicate through this tough phase, Kapoor added.
He said this will put pressure on companies to think differently, cut out on marketing expenses, throwing money to acquire customers; companies would see who their real customers are.