Until the Covid-19 pandemic subsides, startups’ priority should be survival. In this short survival guide, we present some suggestions for startups and their owners and managers that can help them survive the crisis and maintain control of their corporations.
The pandemic is very different from the financial crisis of 2008. Not all corporations lose, and the value of some corporations increases at the stock exchange and some corporations are experiencing greater demand than they were prepared for. Indeed, some corporations are hiring.
However, many corporations cannot use them traditional supply and distribution channels that have been temporarily closed or are experiencing reduced demand.
Challenge #1: Cash management
First of all, the biggest problem most startups face is financial management. Many estimates indicate that it’ll likely take 12 to 18 months for a vaccine to be developed and approved (in a positive scenario), although post-crisis effects may last more. Such thoughts raise a fundamental query: How can startups survive during this era?
Companies need to arrange for this further lockdowns. Preserving money for this era is crucial for several reasons. Although most investors honor contracts, some may not.
Moreover, the investment market has also modified. Valuations have dropped significantly, so raising money for this business is and will proceed to be increasingly difficult. Even for corporations operating in high-demand sectors (equivalent to healthcare), if product-market fit is more likely to take greater than a 12 months, investors will probably be more cautious. Additionally, some opportunities to generate money in the short term have frozen.
On the other hand, cash-strapped startups are less more likely to distract from their end goals by over-indulging in sideshows and can focus on growing their core business model. The goal for the next 18 months is to make sure they will stay afloat.
Challenge #2: Changing valuations
The second challenge in this market involves changing valuations, so business owners have to have realistic expectations. The stock market has already crashed but it might probably go lower.
Startup valuations have also grow to be more conservative. It’s harder to draw financing, and corporations trying to lift money are more likely to lose much more equity capital. The reality for investors in times of crisis is that their expected returns are often much higher than in “normal times”. During the financial crisis returns were typically greater than twice as high in comparison with less volatile periods. If possible, it could be price waiting until the market recovers from the effects of the pandemic before starting to lift money again.
Challenge #3: The complexity of leadership
Third, leadership has grow to be more complex. The key is to be transparent and honest about the situation building, building and deepening trust between management and employees. Excitement comes second. Dealing with emotions is just as essential as showing empathy and making people feel connected. It’s essential to remain true to your values and vision.
Business leaders should consider not only mentors, but also a coach who is not involved in the company and understands the realities of your job. Coaching can contribute to this well-being, quick self-reflection for business leaders and help them make balanced decisions.
Having to put off key employees is a traumatic experience. The job market for top talent is still lively. This crisis is selective and hits some corporations hard while others thrive. Firing top talent increases the likelihood that they may find a good opportunity elsewhere and not return when the crisis is over. This is one more reason why startups ought to be very strategic in managing their money for the coming 12 months.
Challenge No. 4: Changing spatial needs
Fourth, separation from physical work spaces, in particular coworking spaces and incubators, can cut off social interaction. Startups rely on intense personal and social exchange to stimulate creativity and experimentation; fewer opportunities for direct communication and spontaneous meetings may threaten the development of individual startups.
Virtual meetings are particularly effective in drawing on existing social bonds, and integrating and leveraging this digitalization movement will help startups emerge stronger from the crisis.
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Challenge #5: Consider pivoting
Fifth, in these changing times, it’s best to consider changing your corporation model. Several startups across sectors are changing the way they provide value to different customer groups during the crisis, for example by moving online. Thinking about retaining existing customers and offering value to latest customers with possibly different characteristics is the key to success.
Another issue to contemplate is partnering with complementary rivals and pooling resources to introduce latest products which may be in greater demand. We have seen 3D printers being reused in safety equipment and distilleries producing hand sanitizers.
It is during times of crisis that responsible management practices and fair treatment of stakeholders are particularly visible. Fast, transparent and fair decision-making will probably be very helpful.