The onslaught of the Covid-19 pandemic has upset so many aspects of our daily lives and startups are no exception. Once hailed as a bright spot in the economy, today many of them are at the end of their runway. Delayed deals, paused investments and falling consumer spends are becoming common during this time, dampening the sentiments of optimistic and young startup founders.
One of the biggest fallouts of the pandemic for startups is the drying up of investment funds. 2019 was a great year for Indian startups with B2C startups closing over 425 deals worth $6.23 billion in funding. Carrying the same trend in the first two months of 2020, VC investment in Indian startups was even higher than the same period during last year. However, once the pandemic started tightening its grips, VCs too chose to pull the strings of their purses. Research firm ‘Venture Intelligence’ found that several investments made since March were by VCs investing in existing portfolios and in May, the amount invested was about one-fourth of that invested in May 2019. Meanwhile, millennial buyers are struggling with uncertain job prospects and as a result, they have become more conscious of where they’re putting their money.
However, crises can be handled and sometimes even used as springboards to build thriving and successful businesses. In fact, the global recession of 2008 gave birth to some of the ground-breaking businesses (Uber, WhatsApp, Slack) that we can’t do without today. Here are a few pillars for young startup founders to use as a foundation to build their business through any crisis.
Have a purpose behind your business
Having a purpose, other than revenues and profit, can be a huge motivator during this time. Once you have this in place, you immediately become flexible in everything else as long as this purpose is met. For instance, at ‘The Better Home’, our purpose is to empower citizens across the country to make better consumption decisions and be kinder to the planet. Now this purpose can give rise to multiple business models, product categories and formats. That is something that will keep evolving but the heart and core of your business will always be the same. Having a purpose also helps in developing more meaningful relationships with your customers. In this case, they do not purchase your product but they become a partner in your journey and the bricks that make your venture economically sustainable.
Use this time to build your offering
If your sales have dipped during this period or your operations have shut down due to the lockdown, use this time to speak to your customers, brainstorm with your team and improve your offering. During the nationwide lockdown, we reached out to our early customers for feedback and received some very valid and practical suggestions on how to improve our user journey and we took the 45 days of lockdown to focus on implementing the feedback. This way, when the lockdown lifts and when business is back to normal, you hit the ground running.
Focus on what you can control
During a time like this, it may feel like there are so many things that are out of your control. While that might be true, especially when there is so much uncertainty around us but there are definitely some things that are within our control. Strip down all the regular processes to the fundamentals and look at how you can revisit them in the current context, and how it will help make your business more sustainable. For instance, are all your current expenses necessary? Can you cut advertising spends and look at more organic ways to spread the message about your brand? Do you really need all the tools you are spending money now or is there a simpler way to work around it?
Take charge and act fast
The ability to make quick decisions is an underrated skill and is something that makes or breaks a company. Responding swiftly to feedback, making a decision and seeing it through execution, is what sets business apart from the rest. In this case, look at the current market and user base for feedback. Are people uncomfortable stepping out to buy your products? Go online quickly. Are customers looking for alternatives that are lighter on the pocket? Release a lower cost SKU. At our brand, some of our users wanted larger quantities of products, to avoid contact with our delivery persons on a monthly basis, we immediately created a 5-litre can for these customers and they’re happy with it.
Frugality is key
Treat this cash crunch as a blessing in disguise and allow it to steer you towards smart and efficient use of your funds, keeping frugality at the heart of your operations. In my experience, frugal startups, more often than not, have the edge over most funded companies because they are always seeking a more efficient route to the same goal. Frugality gives way to innovation and sustained growth. The ability to flow, adapt and persist through tough times is one of the greatest advantages that startups have over large corporations and what better time to harness this advantage and reroute to cater to the new world.
The writer is the founder and CEO of The Better India and The Better Home.
