What Can Entrepreneurs Do?
Covid-19 is upending the entire business landscape, with many doors opening and closing at lightning speed. What can entrepreneurs do to navigate a way through the upheaval? Dermot Casey, Venture Investment Lead at NDRC, discusses.
From a business perspective, advice falls into a number of sections
If you’re a pre-revenue startup – what is next for you? How long do you have runway for and how will you survive in the current environment. Was your business viable before this crisis started and is it viable now? In business, and in startups particularly, timing is frequently everything. Call it the Golidlocks moment. There were lots of YouTube-like companies before YouTube, but the lack of broadband and the need to download codecs prevented any of them from taking off.
The world has now changed. There is the time before Covid-19 and the time after. There are good pieces of analysis on the economics of the crisis – these will inevitably be revised. This from the London Business School is very detailed.
What has changed for you and your company due to this crisis? If you’re in travel tech then there are some very clear and obvious challenges over the next few months. If you’re in MedTech there are some different challenges – companies that were due to begin trials may see them shut down for a period of time as hospitals become off limits to non-core staff. Other companies may see a surge in demands for its products. Companies supplying food delivery services across the globe are seeing massive growth in demands for their services. Medtronic, which provides critical ventilators, is trying to grow from 100 units a week to 500 units a week. And to improve supply, it has made its designs available to others to manufacture.
Economically no one really knows what is going to happen. Men with economic predictions are the new version of the ‘hot take’. Look at the fundamentals and look at things across multiple time horizons. Zero to three months. Three months to a year. Beyond a year. In the next three months we are likely to be operating in some version of crisis mode. Enforced working from home, suppressed demand in some sectors and spiking of demand in others. There is a joke going around on Twitter: Who was responsible for your digital transformation? Your CEO, your CTO or Covid-19. It’s partly funny because its partly true.
Target The Opportunities
The rate of change and the rate of adoption with and of technologies over the past few weeks has been breathtaking. Some of the patterns of work and shifts we are seeing will never shift back and we’ll invent hybrid forms of working that we’ve never thought of previously. This will create new opportunities. What companies need to think about now is how your value proposition can cater to these opportunities. If your old value proposition wasn’t viable before, is it going to be really now? You might think about killing it quickly and moving on or pivoting into something else. If your business was marginal does it become even more marginal because of the changes that are happening or does it become more valuable?
Use your network. One of the most valuable resources you have right now is the network of people you are connected to and the network they are connected to. After a few weeks in a haze, things are starting to settle into a pattern. It’s not that things are better but after running at 100 miles per hour people are starting to catch their breath a little. And there are opportunities out there.
It may take a while for some of these opportunities to become apparent. In the meantime you need to survive. The usual advice about managing your cash is important. If you have customers, talk to them. Figure out who can and can’t pay and what they can and can’t pay. There are substantial supports available from Government. Review all of these and figure out which ones you can avail of. If you can’t pay people (staff, customers, suppliers, partners) be honest with them. Talk to them. Tell them the situation and see what can be worked out. Talk to Revenue. The Irish Revenue service is world class operationally and right now they’re trying to help companies. Having to go cap in hand and tell them what is going on may not be fun (trust me it isn’t) but dealing with issues quickly and seeing what can be worked out is the only way of dealing with this sort of crisis. Talk to everyone.
Cut your expenses. I expect that everyone is already doing that. The concern is that across the world if we all do this it shocks to the economy. That right now is a policy problem not your problem. You may be able to cut rent, travel, and other discretionary costs (what software are you using, what software do you actually need), consultancy costs etc. Most costs for most startups will be staff costs. You may have to cut people or you may have to cut salaries. Or both. This is never going to be an easy thing to do and you need to really understand the implications – how long does this buy you? Making one cut now and then another cut in a month or two may be more damaging to your company than making a single cut now. This needs to be done fairly, sensitively, clearly, compassionately and legally. And do take advice on this. The supports that have been put in place may help you manage this.
There was a good conversation between Brian Caulfield, Peter Coppinger and Ray Nolan on Friday and the essence of that conversation has been captured here.
Start to think about the medium term. You don’t need an answer today but start to think about opportunities, some may already be emerging. Are there any in your core area or in adjacent markets? Can your solution be repurposed to create a better product market fit for new and emerging markets and technologies? We’ll talk about the medium and longer term in future posts.
On the longer term, the reality is that no one really knows. Angela Merkel, German Chancellor, has told the German people that parts of this crisis will go on for two years. Andrew Cuomo says he can’t see a return to something approaching normal until low cost rapid and widespread testing is available. The only thing we can say with a little certainty is that the crisis won’t just suddenly be over. It’s more likely to be a gradual change. Restrictions will lift and possibly be put back in place again for periods. Psychologically, we all need to think about this going on for quite some time. How do we manage and work for the longer term? How do we deal with all the implications of this crisis?
In the meantime, stay safe and stay well.