By: Itai Green
The coronavirus pandemic is turning out to be an international economic crisis, with ramifications for all industries and markets, similar to the crisis of 2008. A cross-border economic crisis affects companies large and small, challenging an organization’s management and its employees.
Startup entrepreneurs, known for their creativity and flexibility, are rapidly confronting the crisis in various ways. Over the last few days, entrepreneurs in different fields have started to share their conduct consequent to the business challenge that this economic crisis – a direct result of the corona pandemic – is posing. Some are serial entrepreneurs who went through a similar economic slump in 2008 and are sharing their experience with others.
In this blogpost, I am happy to share some insights of entrepreneurs confronting the challenge.
- Crises don’t last forever. They are temporary, even if long, testing the entrepreneur’s mental and economic stamina. The most important parameter for getting through a period this difficult is the quality of the entrepreneur’s relationship with his/her partner – wife or husband. Their support to the startupist. Similarly, the mental strength of the startup’s partners, employees, partners, investors… This is also the time to look at your partners’ eyes, and communicate with them directly, face to face, not only via WhatsApp.
- It’s important to be transparent when communicating the situation with investors and to work with them together so that, on the one hand, the startup operates on a minimum of resources, and, on the other hand, the investor remains committed. From my own personal experience as an entrepreneur, I can say that even when the startup owed me hundreds of thousands of dollars, I continued working for it, because I knew the goal and believed in it. I worked in coordination with the investors and knew that, just as I wouldn’t allow the startup to go under, they wouldn’t allow the startup to go under. With the benefit of hindsight, I can say I’d do the same all over again. That’s what entrepreneurs are like; that’s their state of mind. Let’s not forget, it’s precisely times like these that test an entrepreneur’s mettle, and investors see it. They see it all. And investors (whose mettle is also tried at present) putting their money behind entrepreneurs today are also the investors of tomorrow. When they see the entrepreneurs behaving professionally, they will bring them more of their own and other people’s money. Investors are entrepreneurs’ partners. So, entrepreneurs: be up front with your investors and consult with them. They have what to give. Tons of experience.
- In a crisis, it’s important to reduce everything that isn’t critical and keep the startup to a minimum of expenses (reduce office space, communications, utilities, taxes, etc.). If the entrepreneur is drawing a salary, s/he should take the barest minimum for subsistence. Leave only the most crucial of employees (e.g. technical support for customers. Retaining customers is paramount. Startups rely on them at present and in the future. Every effort must be made to retain them, including updated business models, payment deferrals, payment installments, and so on). What do you do with your other personnel? Put them on unpaid leave, reduce their salaries to subsistence level, postpone payment (only with their consent), offer equity for work, etc.; as a last resort, you might have to let some go. Entrepreneurs are creative. Speak openly with employees (and suppliers) and try to reach agreements. It’s worth a shot. The same goes for service providers. Does your startup have an external development team? This is the time to reduce work to a minimum and pay as little money and as many shares as you can. This is the time when entrepreneurs see who sticks with them through the storm and who doesn’t. This is also the time when the best partnerships are made – those that will last the lifetime of the business.
- Business development and marketing have to become as efficient as possible, online to the extent possible, and as cooperatively as possible. To illustrate, as a result of a previous blogpost, I have already been contacted, on the one hand, by country’s international economic attachés from around the world hosting virtual conferences with entrepreneurs, and, on the other hand, by giant corporations from all over the world. Entrepreneurs have a golden opportunity to leverage the power of entrepreneur communities vis-à-vis potential clients from around the world who understand – precisely at this time (and there are many alike that are by far more efficient and helpful this time !) – that they must grow their reliance on external technologies, because tech-heavy organizations are more flexible and more easily navigate crises like the covid-19 crisis. There is real synergy among entrepreneurs.
- Look for new and other markets. It’s time to get creative and think of adapting your solutions to markets that are less hard-hit. Brainstorm with employees, partners, and investors. You have nothing to lose. It’s a time when entire infrastructures are looking for opportunities to get a foot in a startup door, whether for a one-off joint venture or for an M&A. Some corporations have amassed lots of capital and are just waiting for opportunities. This is the time for them to exploit them.
- Emerging from the crisis will be a gradual process. It’s important to plan appropriately for the various stages of the global market’s recovery.
- It’s important to invest time in identifying alternate sources of financing, such as crowdfunding, government-insured loans, etc.
- At this time, it’s best to transition to daily flow management. That’s right: daily, not monthly. It’s helpful in determining the right steps to take.
Take care and good luck!
About the Author
Itai Green is the founder and CEO of Innovate Israel. He is one of the dominant leaders of Israel’s corporate open innovation. Itai is recognised as a leading player in Israel’s startup ecosystem and is at the forefront of launching its growth at a rapid pace. Itai leads innovation processes by connecting global corporations with the Israeli startup community to create advanced technological solutions; focusing on IT, consumer products, pharma, finance, travel, e-commerce, retail, banking, insurance, energy, construction tech and IoT. Itai is a member in several startup advisory boards. In the past, Itai was head of business development and Innovation at Amadeus IT Group in Israel, amongst other prominent positions at Elbit, CEO at Maxtech Technologies, VP Business Development at Techtium and the co-founder of JerusalemOnline. Itai is the founder of the ITTS community (Israel Travel Tech Startups). ITTS houses 350 Israeli traveltech entrepreneurs and strengthens the internal collaboration between startups, as well as increases the level of engagement between startups, multinationals and investors. Itai has also created the IITS community (Israel Insurance Tech Startups) for the Insurance start-up sector.
Email: [email protected]