Advisor of ImpactGuru a Mumbai-based crowdfunding platform, and various other startups, Hetal Sonpal has been associated with leading Global MNCs namely, Intel, LinkedIn, Microsoft, and Wipro. He had held senior roles in Strategic Alliances, Sales, Strategy and Marketing, achieved business growth as well as a turnaround in global, regional, multi-cultural and rapid change environments. In an email interaction with CXO Outlook, Hetal Sonpal talks about how startups are faring through the pandemic outbreak, and he gives some valuable advice for entrepreneurs to get through the storm.
What tips would you like to give to entrepreneurs to weather the COVID-19 storm?
COVID-19 is a once in a lifetime crisis. One would be lucky if one can escape such a calamity in their life. An entrepreneur needs to look at this as an opportunity than a crisis. When a crisis impacts everyone equally, it levels the playing field. Which means, anyone, before the crisis, had the advantage of scale, depth of engagement, etc., it’s all neutral now because the wider presence means higher sunk investment and depth has no meaning when the customer cannot buy the product.
Why this is more important for an entrepreneur than an established business, is because entrepreneurs have agility and youth (young startup) to their advantage. Just like manoeuvring a small yacht is easier than a giant ship, similarly, it’s easier for a startup to take bold decisions than a large business.
Some of the common actions suggested for startups:
- Conserve cash
- Minimize marketing or even make it zero
- Over-communicate with customers
- Build strong bonds with employees
- Seek counsel from Investors
- Strengthen bonds with suppliers, ecosystem partners
- Reach out to Competitors for a healthy discussion (it helps when you need to address regulatory challenges)
- Look at a brand refresh
- Pivot. If there was ever an opportunity to redefine the business, it is now! Consider product changes and extensions that you were too busy to think about earlier.
- Smile – This Too Shall Pass
Could you tell us about the challenges entrepreneurs are facing during the nationwide lockdown?
While this would vary from startup to startup, as the rules are different for a different type of businesses, but let me try and answer to whatever extent possible:
Working from Home: This is probably one rule that hurts everyone equally, except for a few startups which were ALREADY WFH. Let’s ignore those few. This transition is easy for IT and tech-savvy companies. For anyone who has foot soldiers and hardware and physical movement of people and goods, they have a challenge.
Business Shut Down: Majority of the companies have had to face a sales decline of varying degrees and thus loss of revenue. However, the costs remain the same. While the initial directive from Government was not to lay off or reduce salaries, it’s not practical for everyone to follow the rule.
Dip in Demand: Even if the business is allowed to operate, the sales are impacted, at least in the short and mid-term.
Change in Customer Expectation: With the increased emphasis on hygiene, some customers may demand changes or in some cases, stop using certain products.
Investor Challenge: While the bulk of the investors may call for a reduced valuation (down round in case of funding), there might be some others who might see an opportunity for a particular business and may go aggressive in investing.
Family Pressure: The crisis impacts everyone, including spouse, parents, and kids. But the entrepreneur is supposed to leave the work challenges outside the doorstep when he is home and take up the home challenges afresh. This is less practical in a WFH environment.
Cash Flow: Working capital management will come into force. Every rupee spent will be questioned, and such kind of prudence is very much justified and not over-reaction. If there is a dependency on revenue to run business (investment money has dried out), then it can be a crisis as most of the existing investors might take a ‘wait and watch’ approach, waiting for the ‘dust to settle’ and do a fresh look at the business before further investments.
Has the COVID-19 lockdown opened new opportunities for tech startups?
Due to the WFH concept being enforced across the board, this is being called the ‘DeMo’ moment for tech startups. Today, tech is an integral part of any business. Even a Kirana store has a slew of POS solution and data analytics software to manage and boost sales, so definitely, no company can shy away from tech.
However, if we look at the application use cases, yes, there is increased use of digital technology like AI, data analytics, thermal cameras, robotics, and many more, which are going to be in high demand, not only for new startups but for rapid transformation of existing startups.
- Safety, Security monitoring, and assessment will have increased usages.
- Digital/Online education has exploded. A lot of transformation in education to digital will be permanent and stay around long after the last COVID-19 has been cured.
- The travel and hospitality industry will see increased usage of tech as a fundamental requirement rather than a choice, for revival.
- Offline retail will need to look at a lot of tech solutions for restarting. There will be an increase in demand for AR/VR solutions as trial rooms and exchanges are done away with.
- Health tech will be the biggest beneficiary by far. There is going to be an increased need for tech solutions to not only generate a vaccine faster, but a string of medical procedures will need to have tech involvement for faster turnaround. The demand for AI and data analytics in health will skyrocket.
- Fintech- Digital payments will see an increase in usage. Better risk assessment of financial products will be in demand.
- Agritech will also see innovation coming in with fresh farm produce being supplied directly to end consumer, will enable more hygienic products (lessened threat of virus)
- Food Tech – with the major disruption of the restaurant and bar industry, will also see overall growth.
- Insurance Tech will see expansion as a lot fewer people can take their life for granted, going forward.
- With an increased focus on localization, there would be a lot of support from the Government for indigenous development in technology.
How has the pandemic outbreak affected the startups?
The impact on startups is not the same for everyone. Unlike the common public, who are not impacted in the same way, as not everyone is in lockdown. There are health workers, police and government officials who have been working all through the lockdown, just like not all businesses have not remained shut all through the 60-day lockdown. Similarly, not all startups have remained closed during the lockdown.
Based on the industry and the business model (online/offline), startups have fared differently. Similarly, based on the funding status, startups have fared differently. The ones who have enough funds can surely survive for these two months. The ones who don’t have enough funds have had to cut down on resources to keep the business going.