Tips to the Startup Community for Surviving in This Covid-19 Situation
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The Covid-19 Pandemic has hit the overall Global economy. It is said that the global recession in 2020 might be worse than what we experienced in 2008. As per the United Nations Conference on Trade and Development -
“The world economy will go into recession this year with a predicted loss of global income in trillions of dollars.” The Asian Development Bank (ADB) projects India's gross domestic product (GDP) will slow to 4 per cent in the fiscal year 2020 ending on March 31, 2021 due to a weak global environment and continued efforts to contain the novel coronavirus (COVID-19) outbreak in the country. The forecast assumes that the pandemic dissipates and full economic activity resumes from the second quarter of FY20. The Asian Development Outlook (ADO) 2020 forecasts a recovery in India's economy in FY21 with a growth of 6.2 per cent supported by government reform. India's economy recorded 5 per cent growth in FY19. ADO is ADB's annual flagship economic publication.
How does this impact the startup ecosystem- Foreign Investors, have put off deals across the board. Domestic venture capitalists (VCs), too, are delaying making investments as they cancel or postpone travel and meetings. Some large funding deals for companies in transportation, and food and grocery delivery are likely to be delayed because of the virus. Dozens of smaller funding deals have already been postponed. Consumption of non essential products and services is practically on a standstill in the current lockdown. With the number of cases increasing each day, there is a possibility of a requirement for a longer lockdown. Not only in product startups, but service and e-commerce startups as well, the liquidity crunch is leading to canceled orders/ projects.
This has a direct impact on the ability of Startups to maintain their day to day operations. This impacts their liquidity and hence ability to pay their staff. This impacts their ability to reach their consumers/ customers, ability to market and reach their consumers. The uncertainty about the future leads to demotivation and lack of engagement.
These are all real issues that the entire ecosystem is facing, none of us are alone in this and there is no running from it. We believe that persistence in these difficult times is the only way for startups to sustain and wait it out-
1. It is imperative to understand that this too shall pass. It might take time, but it will. So how do we stay afloat till then? What are the activities that we can do during the lockdown so that we are future-ready? Engage with your consumers and customers to predict future needs in your areas of business and be future-ready.
2. Dealing with the inability to pay staff- if you can implement across the board pay cuts so that you can sustain the next few months, it is better than laying off. Remember, these are the people who are with you in challenging times. Communicate with them with transparency, and implement temporary pay cuts till the situation stabilized. Laying off people at this stage might seem easier, but then you will need to rehire and retrain new employees when things stabilize, impacting business continuity when you need to hit the ground running.
3. Defer bonuses and incentive plans, with the consent of your staff. Liquidity crunch is everywhere. Payments are stuck. Projects are delayed. Take employees into confidence.
4. Funding- Bootstrap- ask for family, friends, angel investors to help tide over this period. If nothing works, see if some of personal savings can keep bare operations running.
5. Follow the same approach of empathy, genuineness and transparent communication with your vendors and suppliers. They are equally impacted by this situation. Build confidence with them and keep in touch. Lack of communication can be damaging to otherwise long term relationships that can be
6. Engage with your employees regularly. Zoom calls one on one or conference, but be in touch- genuinely, with humility and candidness. Build Empathy between yourselves and your teams. Build resilience.
7. Identify areas that each employee can develop on and ask them to take online courses. The likes of Coursera and Udemy are great sources.
8. Planning for the future- create plans on how you will approach the market post the lock down. Create granular execution plans. Involve your team for ideas. It will not only keep them engaged but will offer a sense of security.
9. Look at the silver lining- this lockdown, seemingly draconian measure to some, is forcing us to save on impulse spending on the personal front (Eating out/ movies/ shopping, etc) as well as office overheads (Travel/ electricity, etc). Plan on how to use those savings prudently. Where should you channelize these funds to get maximum benefits.
10. Keep a lookout for relief from the governmental measures. For example the EMI deferment announced by SBI. Times are tough, but they are tough for everybody. The only way we can emerge out of this with minimal damages is if we take our people along with strength, humility and empathy. Dig deep for the strength that made us entrepreneurs in the first place. There was never a guarantee of success, nor a promise of an obstacle-free path. So let’s hang in there and do what’s in our control to the best of our abilities, and things will turn soon.