4 Ways Startups Can Prepare to Survive Economic Tumult
Grow Your Business, Not Your Inbox
The world is in a state of unprecedented tumult. Businesses and governments around the globe have been shaken to their cores by the COVID-19 coronavirus. This crisis has forced companies to ask their employees to work from home for their safety and improved productivity. In the startup world, though, many teams are already accustomed to remote work, and they can use this fact as a way to protect themselves from economic tumult. Here's what we can learn from startups who have resisted economic crises in the past.
1. Flexibility for the way people work
Around the world, the majority of large corporations still operate on inflexible, conservative management structures that care more about how long people are in the office than how productive they can be. The fear of being wrong or arriving late, rather than the urge to advance the company, rules most workers’ lives. Recent and current crises have shown that distributed, output-based companies like modern tech startups have a competitive advantage in survival over these larger corporations.
At my firm, we encourage our startups to measure their employees’ work in outputs, rather than hours. If someone is more productive from 6 a.m. to 10 a.m., then takes care of their kids during the day, and starts working again at night, it is counterproductive to expect them to be in an office from 9 to 5. This kind of flexibility also helps workers handle crises, since lost productivity during working hours can be made up at more convenient times.
I have also personally found that creating a flexible work schedule encourages a more collaborative and less hierarchical work environment. It allows people to feel in control of their time, and they are more willing to dig deep for a project when required. Building an expectation that people can work however and whenever they feel most comfortable also means that productivity is less likely to decline.
2. Work from home does work
As we are learning, many people who work in offices could do the majority of their job from just a laptop. Of course, this reality does not apply to many industries, including the service, entertainment, and travel industries, which rely heavily on in-person interactions. Startups in these industries also struggle when catastrophe hits but, for many startups, working from an office is more of a team-building exercise than a workplace necessity.
Startups that are used to a flexible work situation where employees occasionally (or frequently) work from home have taken to social media lately to show other businesses how to follow in their footsteps and become more resilient to the current crisis. Others have spoken out about how to keep important data safe when working from a laptop at home, which might be less secure than office networks. Many startups who have experience working remotely and from home have an advantage in situations of crisis, allowing them to continue work without skipping a beat during complex times.
3. Solving problems quickly
Startups survive through rapid innovation, quick feedback loops and repeated trial-and-error. Changing plans is a part of growing quickly, and tech startups often outmaneuver their larger competitors by pivoting on a heel to test new business models and strategies. This mode of work means that startups can also react quickly to changing situations and look for opportunity in crisis.
Two event management startups, Rebus and InEvent, have looked for ways that event organizers can survive this period through online meetings, live broadcasts, and even a rewards system to benefit people who support their favorite artists through the crisis. Within days of the announcement for quarantine in Colombia, Rebus launched four new products to help manage essential board meetings, monetize online concerts, set up classes for small businesses, and organize drive-through coronavirus testing in four cities. InEvent, an end-to-end software for managing massive events, quickly launched a new platform to create virtual lobbies for conferences and meetings that can integrate with most video conferencing software.
Mexican AI startup Roomie IT recognized the potential of its humanoid robot to help out health care workers. The company had its initial product prepared to market and sell to companies when the pandemic exploded. Using the model they had ready, they made adjustments so the robot can check patients’ temperature and oxygen levels and ask a few questions to determine whether a look by medical personnel is necessary.
Colombian voice recognition startup Vozy is helping businesses automate their call centers. The company uses AI and machine learning technology to identify and learn regional Spanish accents and provide personalized virtual customer service. Demand for their services has skyrocketed since the pandemic outbreak.
Colombian farm-to-restaurant platform Frubana was created to facilitate the food supply chain between producers and restaurants. However, with widespread lockdown measures in place, restaurant business has dropped off. In response, Frubana shifted its platform to provide online solutions for local neighborhood shops, which are serving as primary food sources for many people sheltering at home.
This adaptability, which startups employ every day to solve problems affecting their growth, helps tech companies thrive even in the face of adversity.
4. Tech companies still struggle in crisis
Not all tech startups survive crises, however. During periods of uncertainty, investors tend to become more averse to risk, preferring to wait on new investments until times become more predictable. Enterprise startups may also struggle to find new clients as large businesses struggle to manage drops in sales and look to cut costs rather than taking on new software. Startups in the travel, restaurant, event, and service industries are facing the same challenges as their established competitors, but with smaller margins and less cash flow to bolster their survival.
Although startups may have some advantages, hard times are hard for everyone. Economic shocks affect businesses of all sizes. The current global crisis will undoubtedly have an impact on the tech industry through a drop in investments, resistance to spending on innovation and a potential for a long period of time without significant revenue. However, crises can also be an opportunity for startups to flourish as they innovate quickly to provide solutions for struggling companies and individuals, from credit lines to virtual concerts.