By Vatsal Jain
The COVID-19 pandemic has spurred tech adoption in the startup sphere. As the world adjusts to new means of life, startups that allow customers to study, shop, work, and communicate virtually have suddenly soared to mainstream adoption.
A Big ‘Yes’ to Technology
The new businesses are being propelled by major crucial technologies that have picked pace over the last few years and have become essential tools for growth today. Artificial intelligence (AI) and machine learning (ML) are undoubtedly the most common of such technologies.
Cloud computing is vital for the fundamental business for several startups, helping assist everything from telemedicine to virtual learning, to food delivery. Startup CEOs have invested a premium on agility, and their key demand from technology is a faster return on investment (ROI) – in weeks, not years.
“The most flourishing startups in 2020 have been those that devise digital strategies into their DNA. These newcomers have zeroed in on digital marketing to customers, cloud connectivity, and virtual communication, which has helped them stay above incumbents.”
Also, being digital-first placed several disruptive startups in a position to rapidly create and roll out new services or products to confront the pandemic-induced stressors and are now able to outpace their less agile competitors.
But, one cannot underestimate the COVID-19-associated issues startups encounter today, regardless of their level of digital expertise.
“Being digital-first per se is not a silver bullet to all the headwinds that companies face amidst the pandemic, yet they do possess more tools at their disposal to cope with the difficulties and come out stronger instead.”
Flexible Distribution and Diversity in Talent
The COVID-19 crisis has questioned the prevalent idea that a physical workplace and connectivity are here to stay. Many startups are functioning without an official head office today sans compromising their efficiency and growth.
Indeed, an informal setup, in tandem with flexible distribution has triggered enhanced connectivity with startups taking minimum time to respond to obstacles, while reducing the hurdles that an in-person workplace comes with. Creating a distributed team has allowed several startups to work sleekly across continents, which has given them a distinct tactical advantage as well as is increasingly necessary for survival.
“The COVID-19 pandemic has influenced startups to re-imagine their work ecosystem, and team members are progressively comfy with telecommuting, which will not go anywhere soon. Distant working has provided startups the adaptability to pull in quality talent and utilize the top-of-the-range for their workforce.”
Remote teams have provided workers the room to manage various responsibilities and thus have resulted in more diversity in the workforce and transmutation of startup hiring norms and environment.
Although the unemployment rate is at a historic high, many innovative startups have hired new employees since the advent of COVID-19, which, in turn, is the outcome of the soaring demand for their core offering as the pandemic started raging across the globe.
Most of these startups are focused on financial services, healthcare, digital marketing, cloud connectivity, EdTech, and online dispersion to customers, and they have witnessed a rise in demand for their core offerings by over 2X amid the economic shutdown.
No More Depending on Others
China’s been hitting the headlines, given its emergence as the hub of the global supply chain. But the country’s worldwide dominance surged in 2017, after which the COVID-19 pandemic struck and later unveiled a disruption that few had anticipated. The onset of the virus underlined the risk to nations on a significant scale owing to the depth of their reliance on China.
With nations striving to become increasingly more self-reliant, it has paved way for several opportunities for young startup businessmen to figure out and create innovative solutions for domestic and regional supply chains that will foster the self-reliance of countries.
Shifting Dynamics in Investment Activity and Procedures
Due to the COVID-19 pandemic, the venture capital (VC) sector is getting affected worldwide, where VCs have shifted from being individualistic VCs to more involved VCs.
“Moreover, there is a smaller investment pool and more risk mitigation, even though with certain subtleties depending on the kind of investor. Also, there is a radical shift in which VCs are gathering some negotiating power owing to the smaller investment pool – a power that entrepreneurs were entitled to until yet.”
Further, travel bans have led to trans-border VC investment to slump over the last two quarters due to the challenges of conducting a truly virtual due diligence. In early-phase investments, despite ticket sizes being smaller, catching up with the founding team or visiting the start-ups’ facilities is a major driver for decision making. While a few transactions are being done, the procedure and time period for investment has got lengthy due to the new dynamics.
But there is still interest in substitute assets within the digital space and VCs have the caliber to cash in on the rising adoption curves owing to the shift from offline to digital frameworks. This new ecosystem may also be an opportunity for a few VCs to partake in businesses that were unable to perform earlier due to overcrowded rounds.
Embracing the ‘New Normal’
In the post-COVID-19 chapter, startup creators have significantly begun broadening their runway ranges (the timeframe a startup can function until it exhausts its available capitals). While earlier it was 12 months, the runway ranges will now be stretched to 18–22 months.
At last, investors have shown evolving priorities with a better focus on lucrativeness (unit economics, equilibrium period, and control on burn-rate). Start-ups are investing in pivoting their business frameworks, along with reshaping their product and business blueprints, although with a more careful method as they push back strategic decisions.
All in all, in a post-COVID-19 phase, capital efficacy is more crucial compared to unchecked growth, while compensations through stock options are rising given the worldwide decline in payrolls.
Vatsal believes in the mantra “Write until the ink runs out”. Despite being a B.Tech Grad in Computer Science, staunch inclination toward writing as well as keen observing skills motivated him to churn out write-ups in the online arena. Coupled with the technical insights he has ingrained, he’s tapping white spaces in the writing bracket in a bid to facilitate people with recent technology and market trends.
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