COVID-19 has adversely impacted the overall investment sector. While businesses across all sectors can sense the repercussions of COVID-19, start-ups have particularly been one of the most vulnerable, and in fact, are facing various formidable challenges both, from a business as well as from an operations' perspective.
Most start-ups have witnessed a decline in supply and or demand, except for those startups that are engaged in the supply and, or delivery of 'essential services', educational technology, gaming or streaming services. Notwithstanding the above, glitches in the supply chain network have either way presented challenges for all start-ups.
However, the start-up ecosystem has been continuously striving to adapt to the present situation as flexibly as possible, by focussing on the need to innovate and diversify their business techniques and its operations.
Here are five crisis management strategies to aid startups sail through the pandemic
and emerge stronger on the other side:
1. Prioritise risk management
For the good part of the year, businesses have been compelled to navigate the unknown and tackle unforeseen challenges. COVID-19 has made entrepreneurs more aware of the risks to their business, be it legal, financial or manufacturing-related. For instance, startups in the automobile and manufacturing sectors, with high exposure to China, struggled for profitability and encountered low cash reserves. The disrupted global supply chain only added to the risk and economic ramifications of doing business in the new normal.
One of the biggest lessons from the pandemic for startup founders has been the realisation to put in place a business model that will assess potential risks, and explore ways to mitigate and respond to them. In his context, it is essential that legal issues are anticipated well in advance to better manage potential contract disputes with overseas suppliers. A crisis manager should assess supply chain and production risks, and ensure stable cash reserves even before the next crisis shows up at the door.
2. Have liquid cash available for emergency situations
COVID-19 has made small business owners understand the criticality of conserving capital effectively for the long-term. The focus should be on prudent cash management by cutting down on marketing spends and other expenses that can wait until business picks up again. For those startups facing a cash crunch, founders should consider liquidating investments to meet the financial needs of the business during the crisis. They can also leverage the opportunities presented by various fundraising options available to access capital to tide over financial problems with a mid-term view.
3. Overcommunicate with stakeholders
A crisis like the COVID-19 pandemic has put the spotlight on business leaders to effectively guide their enterprises and show empathy to the broader ecosystem of stakeholders. It is important for resilient startup founders to lead from the front and ‘overcommunicate’ with their employees, investors, vendors, customers and other stakeholders about how the ship will be run during the crisis. Maintaining open lines of communication with stakeholders will prevent misinformation about the company spreading, thereby safeguarding its reputation. If leaders communicate in an authentic and empathetic manner during a crisis like COVID-19, it will reassure key stakeholders that business continuity is maintained. Crucially, it demonstrates a sense of optimism that the crisis is perhaps a silver lining to usher in new opportunities.
COVID-19 prompted startup founders everywhere to communicate early and often with their stakeholders. For example, Deepinder Goyal, founder, Zomato, released a statement that transparently acknowledged the challenges facing the company, such as temporary cutbacks and downsizing, among others. Airbnb’s CEO Brian Chesky sent a note to 1900 employees expressing his anguish at letting them go. Despite the tough decisions startup founders have had to take during the pandemic, they have been lauded for their open and transparent communication strategy that
displayed their own vulnerability. Many businesses have also set up a coronavirus task force and ‘war rooms’ to build an effective response mechanism to combat COVID19.
4. Rally around your team to innovate
Innovation doesn’t exist in silos. As we look to the future, startup founders should view the pandemic as an ‘experiment’ that helped them understand the real essence of innovation that is possible only through team work. Startups everywhere had to be nimble and empower their team members to think about the bigger picture and produce innovative work to combat the challenges posed by COVID-19.
The pandemic has shown that when innovation flourishes during a crisis, it could lead to new revenue opportunities for businesses. For instance, Bengaluru-based EV startup Emflux Motors empowered its team to pivot and innovate in a new area when its core business came to a standstill during the lockdown. The company’s team of engineers ventured into designing face shields to meet the heavy nationwide demand for PPE and are committed to contributing their bit to the ‘Make in India’ movement. Thus, startups that were able to effectively evolve their business model and seize into emerging opportunities are most likely to survive for the long haul.
5. Plan for the unpredictable
COVID-19 has highlighted the need for startups to be prepare for the worst as scientists have predicted the occurrence of more pandemics in the future. One thing is clear—ad hoc responses from the leadership team will not sustain the organisation’s efforts to safeguard the interests of employees and other key stakeholders in the startup ecosystem. A firm course of action is required to get through not just the current humanitarian crisis, but also any future crises.
Startup founders should assess their company’s level of preparedness to accomplish their short to mid-term goals and revisit their strategy at frequent intervals. They should carefully execute plans, as consumers, venture capitalists and industry observers are watching their response to the COVID-19 crisis. If startups have to prepare for a post-pandemic world, they must find ways to build a support system and strengthen their ties with the larger innovation community. They must rethink business as usual and leverage their capabilities to face a new tomorrow. While the startup ecosystem cannot be completely protected from the potential adverse impact of another crisis, these five strategies can help soften the blow and turn a disaster into an opportunity.
How do you lead during a pandemic crisis? These answers will inspire you to keep going together
1. “This too shall pass”
Engage more in ZOOM free coaching sessions on leadership to share ideas to calm the mind and spirit during this uncertain time. This too shall pass. We shall get stronger because of it.” — Joe Kiedinger, Principal and CEO, Prophit Co.
2. Lean into company values
Lean into our company values, which include always assume good intentions and maintain healthy and respectful communication. Now more than ever, we realize that people are on high alert and feeling anxious.
3. Replicate in-office experiences
For us leading has been all about access to the right tools and trying to closely replicate the in-office experience, but remotely. Use WorkFace, Zoom, and Google Hangouts depending on the type of meeting. Our gestures, facial and hand expressions, and movements convey a lot of useful information, like transparency, enthusiasm, and engagement. Using video helps confer personality and helps connect in a more authentic way. Giving employees the right tools and means to keep
collaborating during the day keeps our productivity (and spirits) high.” — Lief Larson, COO, Jenny Life, Inc.
4. “Reputations are built in hard times, not the easy times”
The coronavirus is top of mind for all of us right now. It’s affecting our business, communities, and day-to-day lives. During this uncertain time, the safety of my employees, customers, and the contractors that use our company’s app is the top priority.
In response to the virus, employees were shifted to remote work. This will allow them to safely obey quarantine recommendations. ‘Reputations are built in hard times, not the easy times.’ I believe in the people I’ve hired. They are a strong team that will pull together and overcome the obstacles presented by this pandemic.
5. Wear the hat of hope
“Small business owners, and all leaders, need to be the Comforter and Chief to give great hope. They must have a steady hand to keep responses appropriate. People tend to allow crisis and hysteria to outpace the emergency. When that is done, you’re in a freefall and the emergency is running you, you’re not running the emergency. The most important thing for new leaders is clear headedness and accuracy of the emergency. Oftentimes, the cure can be worse than the disease, and CEOs have a
responsibility to manage the psyche of people around them. If you want to lead any organization and see it rise to ultimate potential, you must wear that hat. In times of crisis, it’s even more important.” — Kevin Crawford, Founder, Kevin Crawford Consulting
6. Increase communication
One thing one can do is to increase communication amongst the team. Rather than weekly check-ins and teleconference staff meetings, we’re checking in with each other in some way on a daily basis. A short text, an email, a phone call — whatever it takes and whatever works best. This way, we can be there for each other as needed, and address needs as they arise, relieving both team member and team stresses.” —Vinay Amin, Health Expert & CEO, Eu Natural