A man scans an Alipay QR code for electronic coupons in a store on March 27, 2020 in Hangzhou, China’s Zhejiang Province.
Shang Zeyang | China News Service | Getty Images
Like most companies around the world, start-ups are going through a difficult time as coronavirus damages corporate morale and dries up funding. Small and medium-sized businesses have been hit the hardest in most places, but large businesses have also started to cut jobs.
Entrepreneurs currently trying to start their own businesses must understand how the pandemic will change user behavior in the future and adapt, Rajan Anandan, managing director of Sequoia Capital India, told CNBC.
He oversees the venture capital company’s Surge program, which provides seed capital of up to $ 2 million and community access to selected start-ups in Southeast Asia and India.
In the first quarter of the year, as cases of infection around the world began to increase, there was an overall decline in fundraising activities, CB Insights and Crunchbase shown. The data points to worse times ahead as the current quarter could see a more pronounced slowdown.
Currently, more than 5 million people worldwide have been infected with Covid-19, the respiratory disease caused by the coronavirus. The pandemic has plunged the global economy into a downturn as most governments have suppressed their business activities to contain the virus.
Make sure you don’t run out of money
For start-up founders, the immediate priority is to make sure there are enough “leads” – the time they have before their businesses run out of money, said Anandan.
“Once you have an adequate lead, focus on reimagining your business. If you are in an industry that has been deeply affected, you may consider … pivoting to an entirely different segment,” said Anandan . He explained that start-ups may also need to reorganize the way they sell, where they spend their marketing dollars and where they can find new customers.
“Try to understand how the behavior of consumers and buyers is likely to change in light of COVID-19 and to align your strategies with what will be the likely new scenario,” said Anandan by email. “If you have a track, this is also the time to build – to stand out from your competitors.”
Quickly complete funding rounds
Hemanth Mohapatra, partner of venture capital firm Lightspeed India, said start-ups that are currently raising funds should close their tours as soon as they can.
“Our advice to the founders is to close their tours as quickly as possible, not to wait on several conditions sheets, not to wait for the best possible conditions, not to shop and to simply close the round quickly,” he said. -he declares. CNBC “Street Signs” last Thursday. He added that in the current climate, start-up valuations are likely to drop, but predicted that the market would rebound faster than expected.
Find opportunities as behaviors change
As the pandemic derailed several sectors, including travel and tourism this year, other areas – such as e-commerce, digital payments, distance work, online learning and health technology – have had a positive impact.
Vinod Nair, an angel investor in start-up start-ups, told CNBC that the current crisis has resulted in two types of behavior change: First, a tactical change in consumer habits that is expected to last up to two years. Second, there are structural changes underway – as more people will likely work from home even after the pandemic ends, according to Nair.
“I am looking for (investment) themes where there is either a structural change, or where a change that was already planned has just accelerated a lot,” he said.
For example, the use of online markets, digital payments and electronic health services – from online training courses to consulting doctors on the Internet – is likely to increase, he said.
Look for growing trends
Anandan, of Sequoia India, said that alongside changing consumer behavior, the pandemic has accelerated the pace of digitalization. In India, this is evident in the type of growth seen in areas like education technology and digital health, he said.
“The number of online learners in education has doubled in the past two months. Telemedicine, which was practically non-existent in India months ago, is now growing exponentially, “he said.
Mohapatra of Lightspeed India highlighted a silver lining in the difficult business environment of the moment.
“After going through several crises – in the late 1990s and also in 2008 – we have seen the best companies and the best founders emerge from these crises,” he said. “We believe that calamity leads to creativity.”