Despite the overwhelming amount of dismal data and forecasts, we remain positive that a variety of winners will be able to weather the storm. As startups shift to become frugal with cash & re-focus on product over the coming two quarters, here are a few ways tech startups have and may adapt during this period:
- Tech startups have resorted to replacing employee cash salaries with stock units to vest over 2020, a slightly more favorable approach to salary cuts (in my opinion)
- Slashing marketing budgets, hurting the likes of Facebook & Instagram, though demand for core product has experienced a strong surge; tech earnings announcements over the coming weeks will show that CEO’s are cutting deep and not merely scratching the surface
- WFH has become a culture, and Zoom & Slack are now household names; tech has once again proven applicability & efficiency in challenging times, recently the COVID-19 era
- VC funding has plateaued globally, with VC funds struggling to raise;
- Naturally, we remain bullish on cloud services, e-grocery, EdTech, healthtech, and data startups
Contingency planning for a global pandemic, or unfortunately, the dreaded black swan may take many forms. First, cash is (and will remain) king; cutting costs to extend runway is the initial response. Moreover, remote work and online internships are the new norm, though focus must remain on productivity and preserving not only cash but human capital. On the financial side, realizing earnings will be rather underwhelming for many, will shift focus from growth to revenue, and acquisition to retention. The coming period may be the time to double down on product development and realizing the ideal timing to pivot to survive.