The pandemic has caused a severe downturn in global economies. Yet despite the overarching negative outlook, startups seem to be weathering the storm. Quartz mentions that startups seem to be dealing with the pressures of the pandemic far more effectively than larger businesses and conglomerates. Much of this success is due to the flexibility of startups and their ability to adapt. Even a simple Florida start-up could adjust to the changing tides if they knew how to approach the problem.
However, the biggest hurdle is yet to come. A recovering world economy is likely to have different market forces post-pandemic than it had before the outbreak. Because of this reality, it may be time to consider rebooting the idea of a startup.
Startup Survival Tactics During the Pandemic.
The most evident and present danger that startups face amid the pandemic is decreasing investment. Venture capital firms have become more discerning where they put their limited funds to use, and banks have always been anti-startup in their business dealings. Most startups have been competent in managing their cash burn by determining how they spend and utilizing government subsidies to meet their goals. With the pandemic, however, many of these incentives dried up, as well as the funding from typical sources. Businesses have had to look for more creative means for funding their success. Some have resorted to aiming to be self-sufficient. Companies that have managed to do this have a distinct advantage over those dependent on financing from external sources.
Shelter-in-place orders have left many startups lacking ways to interact with customers. However, finding the solution to that problem is simple. Many startups are already tech-based, and the tech they use can help them connect with consumers and make sales online. Other infrastructure, such as delivery, may bite into their limited capital but are necessary for dealing with a world that can’t physically look at goods anymore. These adaptations are required, given the small volume of resources that startups traditionally have to work with.
Larger Companies Responses.
Larger businesses have run into the same problems as smaller businesses but have been slower to respond. The upside of having a massive, scaled business is that the profit potential is unmatched. The downside is that in a massive economic disaster, these businesses can’t adapt quickly. NBC News points out several companies that filed for bankruptcy during the later months of the crisis. These larger companies that have closed their doors were unable to adapt to the situation fast enough. Still, others have leaped to take their place.
Most larger businesses with a high enough reserve can weather the crisis without resorting to closures. Some outlets will inevitably be shut, but the company itself will survive, if with a reduced presence around the country. The New York Times has noted that several investors are already betting on a post-pandemic world being dominated by massive companies who have weathered the crisis and come out on the other side. All of this depends on the post-pandemic economy having the same impetus to growth as the pre-pandemic world. All signs point to this assumption being a miscalculation.
A Different Post-Pandemic Market.
A disaster of this size has forced many businesses to take stock of how they conduct their enterprises. Some companies that shut down the earliest didn’t have fallback measures in place in a massive disaster. Many of these businesses operated on shoestring budgets and tiny margins, which the pandemic’s challenges all but obliterated. Even giant companies with long supply chains and enough time and money to deal with shortages faced problems during lockdowns. Before the pandemic, being a massive business might have been the key to success, but the pandemic has taught business a few lessons. Chief among those is that the size of an enterprise doesn’t guarantee its success in a disaster.
Instead, the success of a post-pandemic business will be based on its ability to adapt and pivot. Founders Institute defines pivoting as shifting the business to encompass a new strategy that may entail changing how the entire company functions. Pivoting is how many smaller firms could avoid the crushing issues that the pandemic laid on the doorsteps of the massive companies. Pivoting only works if a business is small and agile and can shift its operations quickly and flawlessly in a different direction.
Adaptability goes hand in hand with speed. Businesses that need to adapt to a changing economy need to quickly or get caught up in the collapsing wave of bankruptcy. Again, smaller companies are the best suited to do so, but larger businesses can also benefit from being adaptable. One of the most potent examples of adaptability in the current climate is how quickly and effectively businesses switched to remote working. Several larger companies already had infrastructure and security protocols to enable a quick switch.
In contrast, others had to retool their business protocols to deal with the new demands of a remote office. It would be increasingly difficult to get employees back into an office after getting used to the remote-work paradigm. Businesses post-pandemic may have to consider this as they move forward. Is it worth losing an experienced hire over remote working arrangements? This question is one that companies need to answer if they want to compete in a post-pandemic world.
Rebooting The Startup Post-Pandemic.
What has the pandemic taught the business world? Some might say it has taught us that some businesses are too big to fail, but the truth may be a bit more nuanced than that. Several mega-sized corporations collapsed in the fallout of the pandemic’s economic contraction, and a few more may yet file for bankruptcy in the coming downturn. What we should have learned is that businesses need to be more agile in their construction. They must be able to pivot and to adapt to changing market conditions. They should be able to aim for self-sufficiency early on.
In a post-pandemic world, a startup shouldn’t have scalability as its most important trait. It should have speed, adaptability, and the ability to switch gears quickly as part of its success metric.