As revenues crash, startups learn to adapt products, services
The startup community is rallying to fight the coronavirus crisis in the best way it knows—with tech smarts. Venture capital funds and founders with deep pockets have pooled ₹100 crore and created ActGrants to support rough-and-ready projects, ranging from innovative ventilators to telehealth, which have the potential to make an immediate impact.
These moves are in tandem with efforts to curtail the spread of the virus and show the tech community’s solidarity. Digital conferences are popping up everyday with advice for founders to cut costs, conserve cash, strengthen their products and keep their chin up in the interim.
Behind the buzz, though, is the reality that many founders are struggling to come to terms with in a world suddenly turned upside down by a virus. Funding, revenue and cash flows have dried up along with the lockdown of an estimated one-third of the global population.
Those who take the leap into entrepreneurship are used to dealing with uncertainty, but nobody has seen anything like this before. All calculations are off and it’s not clear when new plans can be made.
Teams have taken drastic pay cuts and are working on improving their products and integrations during the hiatus. But there’s also a realization that the impact of this crisis will be far deeper than past financial crises.
It will require a mental model shift to envisage surviving and thriving in a post-covid world. As business guru Peter Drucker put it years ago: “The greatest danger in times of turbulence is not the turbulence—it is to act with yesterday’s logic."
Prasanna Krishnamoorthy, founder of SaaS startup accelerator Upekkha in Bengaluru, is trying to come to grips with the new normal. March was mostly about trimming costs and chasing dues and advances. But now founders are starting to think: what next?
“The reality has changed," Krishnamoorthy says, referring to a scene from the film, The Matrix. “Old assumptions don’t hold."
Upekkha uses ‘effectuation’, a research-based approach to entrepreneurship that sets out principles to help startups deal with the present.
In effectual reasoning, one starts with a set of means, and goals emerge in the process of deploying them. That’s the inverse of the reasoning that starts with goals and looks for the means to achieve them.
“We asked everyone to drop their quarterly plans and focus on how to apply effectuation in these circumstances. We started with something called the ‘quilt bazaar’," says Krishnamoorthy. This is an effectuation principle that helps stitch partnerships together as in a crazy quilt.
“Basically you have to say, ‘these are the things I have and these are what I want’. The key is to do this trade without spending money which is a scarce resource for everybody. And you have to do it in a way where everybody’s revenue can increase," he explains.
For example, a startup may have a project from an existing client where other startups can pitch in for parts of the work. Currently, in the Upekkha tribe of 48 startups, 170 ‘gives’ of various kinds have come up on the ‘quilt bazaar’.
Founders are also thinking through ideas to help their customers in new ways during this crisis. For example, CRM startup Hashtag Loyalty, whose clients include restaurants and retailers, saw its revenue drop 80%.
“It was only fair to pause subscriptions for our clients because their businesses were shut during the lockdown," founder Krishi Fagwani says.
The company has come up with an initiative called ‘SaveLocal’ for people to buy gift cards and discount coupons of their favourite grocery stores and restaurants. These would provide a lifeline to the small businesses during the crisis and can be redeemed after they reopen.
NEW USE CASES
Some startups, meanwhile, are finding new use cases for their products. Sales tech startup Lucep, for example, has re-purposed its product for use in telemedicine initiatives. “We’ve volunteered our software and time. Thousands of doctors are using Lucep to receive inbound queries," says Lucep co-founder Kaiesh Vohra.
The more fundamental question he’s working on is the post-Covid business landscape which will be “dramatically different" as behavioural patterns of working and purchasing change.
Krishnamoorthy cites the example of the Ice Hotel constructed each winter with ice from the Torne river in Sweden. Before Yngve Berqvist made this a successful business, nobody had imagined a need for such a hotel that melts down each year.
“The usual way we all think is: ‘Let us discover what opportunities are coming up’. The effectual way is to ask: ‘What opportunity can I create?’"