Given theevents over the last week, concern about the global impact of coronavirus hasshifted into higher gear as apprehensions about health and economic slowdownheighten. Oil prices are trading around 30% lower than a week ago, following aproduction dispute between OPEC members Saudi Arabia and Russia. And in India,a stressed financial sector has come under further pressure with the impositionof the moratorium on Yes Bank and the rescue spearheaded by the State Bank ofIndia. All this built up to a manic Monday (March 9, 2020) as stockmarkets in India and globally were roiled; trading in the US market was haltedshortly after opening as the Dow plunged 7.9%. Indian stock markets saw theirworst single-day decline in absolute terms - the BSE Sensex fell 5.2%, that day. So, it's not an exaggerationto say the months ahead look challenging.
So, whatare the most important things for start-ups to bear in mind at a time likethis?
1. Conservecash: cash is king.
2. Revisityour business plan and all assumptions therein: in particular thoserelating to customer acquisition costs, sales cycles, supply chains andborrowing costs, where applicable. If you don't already have a plan B, put onein place on priority.
3. Moderateyour expectations, both, on timelines for fundraising and on valuations. Sincelate 2018, we have been advising our investees to assume a 9 month timeline forfundraising. The going will likely be further uphill.
4. Step upcommunications with your customers, particularly if you are expecting anydisruptions in service/product. Customers will truly appreciate a proactiveapproach here and it will help build loyalty in the longer term.
5.Communicate with your team on how you are thinking about your business even asyou continue to be thoughtful about their health and safety in handlingCovid-19.
6.Strengthen your board or set of advisors with people who have managedbusinesses through multiple cycles.
7. Watchout for business concentrations: by customers, vendors, geographiesetc. The Yes Bank episode has highlighted the importance ofdiversification even in bank accounts and UPI partners.
There is no doubt that firms that are better prepared will be better placed.
Circumstanceslike these also come with silver linings. Managing your costs offers realopportunities for operational improvements and not just layoffs. Slowdownsalso reduce pressure on some costs (like rents) and the war for talent moderates.If you survive a crisis and come out stronger, competitive pressures in yoursector too would have likely abated. And finally, the global VC industry hassubstantial dry powder - $189 billion (Pitchbookdata, June 2019), and so, investors will be supportive and back businesseswhich are being run in a sensible manner.
At OmidyarNetwork India we are proud of our investees - you are working towards creatinga meaningful life for every Indian. We want you to know that we are committedto your success and committed to actively helping and partnering with you inthe weeks and months ahead.