Coronavirus pandemic: How should startups deal with Covid-19 fallout?

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Overcommunication, keeping a cash runway, and having a fixed routine despite working from home are some of the keys for startups to deal with the fallout from the novel coronavirus, according to top venture capitalists and entrepreneurs from India and China.

While China is returning to normalcy and business as usual, the experiences of Chinese firms and entrepreneurs can serve as a reference point for Indian founders, where cases of the virus are still rising rapidly.

“Things are back to normal now, but for the last two months, we spoke to clients, gathered data on a regular basis, and organised brainstorming sessions internally, for the management and product teams on how to operate during this period,” said Andi Chen, co-founder of Whale, a Chinese startup providing software and tech solutions to retailers.

Other steps he took during the period was to be more selective in hiring, reinforcing objectives and targets internally, and not changing overall sales predictions despite the virus. “This quarter’s sales will be hit and maybe next quarter as well. But we chose to retain our overall sales targets,” Chen added in a call organised by industry body TiE-Delhi.

According to Mohit Bhatnagar, Managing Director at Sequoia Capital India, a founder should over-communicate to all stakeholders- employees, vendors, investors, etc.

“Even before the question of rationalisation (layoffs) arises, discuss unpaid leave, salary cuts, etc. Having a cash runway is critical,” he said.

He also suggested if founders were in the midst of raising a funding round when the virus derailed daily operations, they should try their best to close the round, even if it may be at a lower valuation or have different terms than earlier proposed, for the sake of having cash and the bank and surviving.

Investors also spoke about the importance of peace of mind and dealing with stress in unfamiliar conditions such as working from home for an extended period.

“It helps to have routines even during these uncertain times because it gives a sense of normalcy,” said Vani Kola, managing partner at Kalaari Capital.

“For example, I wake up, do yoga, take a bath, dress as if I’m going to work and set myself up in my home office,” she added, also recommending that founders should take some time out for reflection.

Beyond the gloom and doom, investors also cited a number of possible positive outcomes from COVID-19 for the startup ecosystem.

“This is a good time to examine the quality of revenue and quality of growth in companies. Invest in product quality and intellectual property,” said Dev Khare, partner at Lightspeed India Partners Advisors.

The focus on the quality of revenue also stems from not wanting growth at all costs, and without discounting or giving away products for free, Khare said.

“We always say, never waste a good downturn. During this period you can hire the best talent without fear of poaching; there is no excessive marketing spend or vanity metrics that you have to prove,” Sequoia's Bhatnagar said.