Investors Need to Bet On Startups in 2020 Entrepreneurs and innovators will lead the way out of this crisis to adapt our economy.

By Glendowlyn Thames

Opinions expressed by Entrepreneur contributors are their own.

Thomas Barwick | Getty Images

The idea that life will simply go back to the way it was once the global health crisis subsides is unrealistic. It's not as if this is the last time we'll face such a crisis as a global society. A host of businesses will have to fundamentally rethink how they operate in our current world and that's going to require innovation-based solutions.

Young startups and entrepreneurs, precisely the ones best positioned to deliver this innovation, are getting squeezed. Traditional sources of funding, including capital from investors, have tightened up or been put on hold.

Many of these companies were cut off from benefits like the Paycheck Protection Program, or SBA Economic Injury Disaster Loans because as small, pre-revenue companies, they often don't have employees, per se — just a motivated founder and core team who believe in the technology with a smattering of 1099 contractors or consultants

Related: 5 Things Startups Must do During Covid-19 Crisis, According to Investors

These companies are a brain trust that thinks about real-world problems and then solve for them. We need to tap into their imagination and support them in developing new technologies or adapting existing ones.

If there's anyone who can help reinvent economies, it's that the startups and entrepreneurs who thrive on being innovative and solution-based. These challenging times promote creativity. Having an urgent problem staring you in the face helps break down competitive barriers and encourages a greater degree of cooperation and collaboration than might exist in "normal" times.

The question, then, is what do the various members of the entrepreneurial ecosystem need to do to ensure that this creativity is nurtured and that innovation isn't snuffed out right when we need it most?

Bet on creative solutions

The natural tendency in the investor community, whether angel investors or venture capitalists, is to pull back on new fund commitments when the economy gets shaky. Conventional wisdom says that cash is king in times like these.

But there's nothing conventional about the current economic downturn. This is no time for investors to be sitting on the sidelines. That said, they should be leaning in even more to investment opportunities because we need the innovation that those young companies and entrepreneurs have to offer. The good news is that from all accounts global VC investors are sitting on bundles of cash waiting to invest.

Support entrepreneurs with all you have

There's no question that for the U.S. to remain economically competitive with Europe and Asia coming out of the crisis, we have to do more on the policy front for our innovators. The UK launched a 1.6 billion euro rescue package for tech startups, including loans and grants for research and development. France and Germany launched similar programs worth 4 billion and 2 billion euros, respectively. Our competitive position is at risk if the U.S. does not have a comprehensive plan to follow suit, and quickly.

Related: A VC's Advice for Raising Capital Post-Covid

Meanwhile, state policymakers and government entities need to make sure they're pulling all the different levers at their disposal. This includes surveying the entrepreneur community to get a real-time read on their primary concerns and ramping up educational outreach to inform them about the resources that are available to them.

This education should be delivered via online webinars and other content streams that are easily accessible while we're all staying safe and practicing social distancing. Mentor networks should continue helping young companies connect the dots and navigate these tough times via regular videoconferencing calls.

Similarly, policymakers and business development agencies should ensure that pitch competitions and demo days can be transitioned to some kind of virtual offering to keep the momentum going and facilitate matches between ideas and capital.

Run a tighter ship

Entrepreneurs, meanwhile, need to hunker down and keep their house tight. Make no mistake: Proper cash flow management is paramount. Investors will be looking at a company's management team — even if it's just one person — to see how well they're managing this crisis, how resourceful they're being, and if they're able to sustain their operations while still pushing the development of their technology forward.

Those companies who have their act together and demonstrate that they have a plan for growth are far more likely to attract capital. I am hopeful there will be capital available for good ideas and great teams.

After all, angels and venture capitalists are inclined to put their cash to work. But, they'll want to be smart and pick the strongest candidates.

Related: Covid-19 Will Fuel the Next Wave of Innovation

The vast challenges that we're facing with this pandemic are precisely the time to be supporting entrepreneurs and startups, to help spur the next economy.

Those investors, nations, states and regions that understand the importance of innovators in moving past this crisis, and support them accordingly, will be best positioned for tomorrow's economic growth.

Wavy Line
Glendowlyn Thames

Executive Director, CTNext

As executive director of CTNext, Glendowlyn manages and oversees the array of strategic economic development programs focused on fostering entrepreneurship, startups and growth-stage businesses while cultivating a robust innovation ecosystem on behalf of the State of Connecticut.

Editor's Pick

A Father Decided to Change When He Was in Prison on His Son's Birthday. Now His Nonprofit Helps Formerly Incarcerated Applicants Land 6-Figure Jobs.
A Teen Turned His Roblox Side Hustle Into a Multimillion-Dollar Company — Now He's Working With Karlie Kloss and Elton John
3 Mundane Tasks You Should Automate to Save Your Brain for the Big Stuff
The Next Time Someone Intimidates You, Here's What You Should Do
5 Ways to Manage Your Mental Health and Regulate Your Nervous System for Sustainable Success

Related Topics

Business News

After Being Told They Could Work From Home Forever, Employees Made Major Life Changes. Then, a New CEO Ordered Them Back to the Office.

Farmers Group CEO Raul Vargas is facing backlash for the change, but he says being in the office brings more "collaboration" and "innovation."

Money & Finance

3 Secrets to Streamlining Your Accounts Payable Process

Not all AP automation software is created equal. Leveraging the right AP solution that aligns with your unique vision and available resources will ensure your business grows without compromising its individuality.

Business News

Uber Eats Deliveries Are Flooding a Los Angeles Neighborhood — Except No One Knows Who Placed the Orders

Residents of L.A.'s Highland Park neighborhood are once again the target of dozens of unsolicited Uber Eats orders. The "annoying and somewhat disturbing" mystery is gripping the city.

Business News

Hedge Fund Pays NYC Interns $20,000 a Month on Average, Sent to Lavish Palm Beach Kickoff

Citadel is known for its over-the-top parties and company retreats.


5 Ways to Build and Maintain Valuable Relationships With Journalists — and Why It Matters

Building genuine relationships with journalists is essential in today's digital media world.

Business News

Pete Davidson Says He's 'Figuring It Out' After Buying a $280,000 Boat While 'Very Stoned'

The former "Saturday Night Live" star purchased a used Staten Island Ferry with Colin Jost in January 2022.