The ongoing COVID-19 pandemic has become a major crisis for young business owners. With employees unable to attend offices, operations temporarily suspended and a government-imposed 21-day lockdown, everything for some time has come to a halt. The unprecedented health crisis is going to have a deep impact on every aspect of Indian society and the economy. One can never be certain of what the future holds post the virus gets contained and when will there be business as usual.
The young startups who had high hopes from this year about their businesses and had different growth and expansion plans are now struggling to cope up with the crisis. Most of these startups are headed or founded by young chaps who are in their twenties and have never been in any typical corporate structure. They are not aware of what goes into the complications of such a crisis. Sure they are capable of taking their businesses to a new height, but when it comes to dealing with such a tough situation, everybody looks for a mentor.
To help these brilliant minds and future leaders, their mentors have come in support now. Understanding the criticality of the situation, Venture Capital firms like Accel Partners India, Sequoia, Matrix Partners and many more have extended their help to their portfolio companies. These business veterans with their extensive knowledge have started to assist future business leaders.
In an open letter to all the startups and their founders, these early-stage investors in India have made a document to pool knowledge and best practices from across the startup ecosystem on how to deal with the crisis at hand. The document covers all aspects of how to manage high risk and uncertainty and how to approach worst-case scenario planning.
The VC Investors in their open letter highlighted that “this is first and foremost a humanitarian crisis, and we encourage founders to focus on health and safety – for their teams, their families, their customers and themselves, as the top priority.”
The clutch of investors said that the reason for them to come together and prepare the document was to share their collective experience navigating crisis situations over the past several decades.
Although this letter could be anticipated as a concern for their investments, VC firms writing a letter to startups can also be seen as a sign that investors are losing appetite to invest in the current scenario.
Several startups are now facing falling revenues since the lockdown and the halt of the global trade. Investors have cautioned startup founders to not take a “wait and watch” approach and assume that there will be a delay in their “receivables,” customers would likely ask for price cuts for services, and contracts would not close at the last minute.
“Through the lockdown, most businesses could see revenues going down to almost zero and even post that the recovery curve may be a ‘U’ shaped one vs a ‘V’ shaped one,” the letter added.
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