- Vinay Nair
Survival & Revival of Startups post COVID-19
Updated: Jul 20, 2020
Almost all of the world’s organisations have felt an impact from the coronavirus pandemic and one of the biggest losers of the COVID-19 outbreak have been Early Stage Startups.
The ongoing forward momentum of our burgeoning startup ecosystem has taken a huge hit due to the pandemic. Startups are now struggling to survive in these turbulent times with negative impacts from the rapid spread of the coronavirus, affecting their business resources and sometimes even forcing the founders to rethink strategy or just pivot from their core business areas.
While some startups have benefited from this unprecedented event, others have had to face huge losses on account of the lockdown.
Founders are now facing a double edged sword with their current situation looking less attractive to prospective investors at one end, and a growing hysteria among consumers on the other side.
Until there is a vaccinated cure against the virus, the way forward is to navigate through the upcoming and unprecedented challenges and look for the best options to survive/revive from the incoming waves of coronavirus.
How can startups resolve their cash flow problems?
Startups will have to be very careful with their cash reserves.
Entrepreneurs be needed to work on their cash balances, figure out what can be utilised for daily expenses and how much of working capital has to be retained to ensure sustainability of their business operations. Most of the early stage startups have low margins and therefore do not operate with too much cash in hand.
Established players among these startups might have to recalculate and find an acute balance between their revenue and expenditure. They may start with cutting down on variable expenses like salary, utilities, raw materials, etc., and try to renegotiate fixed costs like rent, utilities, among other things. However, laying off employees would not be the most viable solution, instead of that pay cuts and employee stock options will provide a more reliable and socially acceptable solution.
Workplaces are being substituted by virtual rooms, which can be a cost-effective method, but is not well suited to a startup where collaboration and proximity is key.
How can founders plan around this uncertainty?
Startups need to keep check on the recessionary effects.