Startups, in the last few months, have seen a visible dip in their businesses. Across the board, companies have struggled to stay afloat. However, there are a few startups who have managed to cope and overcome these unprecedented times. Utilizing unique leadership practices, adapting their business models, and bringing innovative products to market – they have kept their heads above water.
The nationwide lockdown imposed by the government to curb the spread of coronavirus brought economic activity to a standstill for nearly three months. This has impacted businesses of all sizes, across the country. Startups were not spared. They have seen a sharp fall in business revenues, and a growing gap in their cash flow, followed by a slew of other challenges.
While some startups in sectors such as edtech, online groceries, entertainment, and health are witnessing growth, the overall ecosystem has been severely impacted.
Ridesharing dropped to zero, and food orders went down by more than half. Many riders packed their bags and left the cities for a while. The story is the same for all ride-sharing platforms.
Food delivery services like Foodpanda and Pathao saw a sharp downturn. Initially, more than half the restaurants, at least temporarily, closed down. The rest relied on deliveries. Even then, demand was suppressed as consumers were cautious about having food from outside.
App-based truck rental service Truck Lagbe saw a huge drop in their business. Overnight, businesses and consumers stopped ordering.
However, not all is lost. On-demand video-streaming platform Bongo has seen more than 5x their usual traffic. This viewership, however, doesn’t always translate to revenue.
These startups are to name but a few. Aviation, travel and tourism, hospitality, real estate, and logistics are among the sectors that have been impacted the most by the pandemic.
The Challenge
Companies have seen a sharp fall in business revenues, and a growing gap in their cash flow. Apart from that, startup funding has taken a hit with investors becoming wary of economic uncertainties triggered by the coronavirus crisis. On top of this, customer needs are shifting.
The COVID accelerator, a joint initiative of the Bangladesh Hi-Tech Park Authority (BHTPA), BetterStories Limited, LightCastle Partners, and US Market Access Asia was inaugurated by ICT State Minister Zunaid Ahmed Palak on June 6.
In the fourth session of the program titled “Business Continuity Planning”, powered by Pathao, founders of Pathao, Bongo, Trucklagbe, and Gaze shared their battle-tested lessons.
Financial Strategy: Don’t run out of money
For startups, the biggest threat to survival is running out of money.
Founders need to estimate all possible revenue cuts. Plan for those situations. And be prepared so their firm survives and can see the tough times through. There are many ways to do this.
A framework recommended by Fahim Ahmed, CFO Pathao, is Zero-Based Budgeting which requires starting from a “zero base” and building up by estimating the costs and needs of every wing of one’s organization. Applying ZBB to a firm means bringing down all the allocated budgets to zero. Then, going through every department of the business, like marketing, customer service, sales, and engineering, and adding required amounts to each section. This results in a budget that is absolutely needed to survive, with no extravagant expenses. It is always better to overestimate a crisis rather than underestimating and exploding. ZBB helps one do just that.
Two weeks into the lockdown, Pathao announced the implementation of progressive pay cuts throughout the company. The progressive nature of this salary restructuring meant that the hardest hit would be those with higher salaries so that lower-paid employees would be protected and job cuts could be avoided.
Shortly after the internal announcement, Pathao made their memo publicly available for the benefit of other companies in the ecosystem facing the same challenge. The memo is available online on the Future Startup website.
These salary cuts seemed preemptive back in April. However, since then, most startups in the ecosystem have taken steps to reduce their payroll costs. The earlier they acted, the better off they are since preserving cash is crucial for survival.
TruckLagbe’s Founder Anayet Rashid shared that they went through a similar exercise early on. In fact, they had the difficult decision of parting ways with much of their field force team.
Many companies had layoffs. Many have shut their door altogether. Across the board, founders are faced with difficult decisions. These decisions are not popular or easy but are usually crucial for survival.
Bangladesh Starups Survivial Guide for Coronavirus, April 2020, LightCastle Analysis
Communication Strategy: Tell your story (Or someone else will)
During a crisis, leadership becomes more complex… and crucial. Transparency is key to building and deepening trust between management and employees.
“We may be building the digital economy, but we still live in an analog world of humans. Your team, customer, ecosystem, investor, and policymakers need to hear from you.” said CFO of Pathao. Here’s a checklist to think about this:
- The team needs to believe in the vision & strategy to be motivated.
- Customers need to know you are serving their needs, even as their needs change.
- Your ecosystem needs you as you need them: to partner and build value.
- Your investor needs to see that this is the market and you are the team to back
- Your policymaker needs to hear why you matter so enable your success
Product Strategy: Rethinking Priorities, Keeping Focus
In light of the crisis, the market has shifted. Consumer habits have shifted. Has your company has shifted? Does it make sense to keep building what you previously planned? Startups need to rethink more than just their finances. They need to reassess their business and product strategy.
Founders have to guide their teams by defining priorities. They should identify and communicate the 3-5 most important ones. This means making smart trade-offs. What conflicts might arise among the priorities? Between the urgent and the important? Between survival today and success tomorrow?
Startups can start by asking themselves these 3 questions:
- What services will our customers need?
- How are they spending their time and money during the lockdown?
- What are the problems we can solve for them?
- Lastly, but equally important, will this investment of time and effort be justified post-COVID?
A dozen or so companies started delivering online groceries. Pathao launched its on-demand grocery delivery service, Pathao Tong. Evaly launched Evaly Express for groceries. PriyoShop, the e-commerce marketplace, launched a similar service. Everyone from Sheba.xyz to e-commerce site Backpack launched such a service.
People do need to buy grocery supplies. But is this a line of business these companies will pursue in the post-pandemic world?
Changing your roadmap
From my professional experience in product management, I’ll suggest the following:
#1 Assume that recovery will take time and that consumer habits will change. Pay attention to those changing habits. There will be innovations coming out of this crisis as people’s priorities and spending habits shift.
#2 Reassess and change your product roadmaps. Some features and products should be accelerated while some should be put on hold.
Business Strategy: Forging partnerships, building momentum
Compared to business as usual, crises produce an urgency and momentum to get things done. Deals that would have taken months to finish are negotiated in hours and executed in days.
However, it would not be productive for startups to use this momentum and attempt to build everything under the sun themselves. Instead, after assessing their customer needs, startups need to find ways to collaborate with others.
Take the example of online marketplace Sheba.xyz. They partnered with over 30 companies, small and large, and started a fund named “Mission Save Bangladesh” for those who are deemed most at risk from the coronavirus. These partners included newspaper dailies like The Daily Star and Samakal, big corporations like IPDC, and many local startup organizations.
Another interesting case-in-point is the recent partnership of on-demand video streaming service Bongo and Pathao. The two companies found a way to work together and deliver entertainment.
Times will be tough, the road ahead may seem uncertain. Funding may be hard to come by and hockey stick growth may be way off. However, both globally and in Bangladesh, a new cohort of enduring companies will emerge from the 2020 recession. The companies that can move fast, remain flexible, and have an enduring mission will be best positioned to make it.
Did this advice stir some thoughts? Be sure to put them to action. Stay tuned for the second part of this series. Are you a founder building something exciting? Drop us a line.
