- Ways in which the startup ecosystem is being affected:
- Steps that have been taken by the stakeholders in startups to provide stability\
As coronavirus pandemic continues to spread with no signs of abating., over 100,000 cases have been confirmed in 100 countries across the globe. Many deaths have been reported, and now India is also on the hitlist. Preventive measures are being taken by the Government and by the global industry are already having widespread effects.
Ways in which the startup ecosystem is being affected:
1. Decreasing staff productivity:
Decreases in staff productivity can create significant issues for interdependent activities in the startups. The diversion of attention because of the need to attend to personal needs (like family, caregiving, healthcare concerns, or household issues) or societal requirements (like monitoring the development of this virus and state or Government reactions to it) — can make a deep impact over days, weeks, and months of this outbreak.
The increased frequency of absence because of the personal issues poses a major challenge to fulfillment of the contracts and other business obligations for the startups. A survey found out that some 40% of the companies had stranded employees who were facing some form of hurdle while commuting to the workplace. These figures are getting higher now.
Increased frequency of absence can also be accompanied by heightened utilization of benefits like healthcare, sick leave, or family leave, which startups may or may not have sufficient liquidity to support. These considerations around the benefits are especially inefficient for startups in a gig economy, which may further need to compensate the affected employees despite their ability to any perform tasks.
2. Supply-chain dysfunction:
Turmoil in the supply chains can reap significant consequences for startups across a diverse range of sectors, including technology and healthcare. This is especially the case given that these supply chains tend usually concentrated through a selected group of vendors.
Since China is the world’s largest producer of industrial goods, the widespread quarantines in the region are proving debilitating as the number of bulk freight shipments has fallen below 70% since January and some 40% of China’s trucking capacity is still offline. While American companies have sought to the diversifying away from China in recent years due to political rhetoric, thus, as the viral outbreaks spread to other major manufacturing countries (like Vietnam, Bangladesh, and Mexico), supply chains for the instrumental parts are likely to face shortages, delays, and quality compromises.
In terms of services, startups depend on regulatory, legal, and industrial collaborators for the deliverables that are prerequisites to the business. Disruptions in this soft supply chain are capable of delaying essential credentialing, contracting, or data acquisition may prove incapacitating for startups. Thus, the proliferation of the outsourcing service supply chains for critical tasks, like customer service and administrative workflows, denotes another dimension of the vulnerability for service provision.
3. Facility closure:
Startups ought to consider the impact that closing and/or restricting the facilities can have on the performance.
Guidelines from the Centers for Disease Control (CDC) and Occupational Safety and Health Administration (OSHA) have listed out recommendations for the employers to develop “infectious disease outbreak response plans,” which may require an office or factory closures. Already, employers across the country are preparing for “social distancing measures” that are, overnight, converting physical workforces into the virtual ones.
With an acceleration of community spread, leading to the diffusion of virus out beyond the borders, urban centers effect thus, far more startups residing in neighboring suburbs, which are required to close their workplace.
Steps that have been taken by the stakeholders in startups to provide stability
- Taken together at their face value, these supply-side considerations are overwhelming for the startups already facing innumerable daily fires, which now need extinguishing. But there is a wide range of steps that CEOs, funders, and partners or clients of the startups can take to regulate themselves against this exogenous threat posed by the coronavirus. Startup CEOs need to consider organizational, operational, and financial workarounds.
- Operationally, thus they can take steps to prepare for a kind of virtual workplace by establishing clear methods of digital communication and metrics to ensure proper productivity. They can also prepare for an uninterrupted workplace in which employees get more time than usual for the personal affairs and may otherwise remain preoccupied with embracing the workflows, laying out clear priorities for the work completion, and providing flexibility beyond the standard office hours.
- Organizationally, CEOs can also cross-train employees and develop clear workflow protocols to work productively against staffing deficits that may arise. To strengthen their organizational strategies, CEOs can identify the weak points and/or major dependencies in the supply chains. Then they can seek to work against these, which is possible either through delegation to the additional ﬁrms or through an integration internally.
- Financially, CEOs can shift their business models to prioritize the revenue overgrowth in the short-run by ensuring liquidity against unexpected supply or demand shocks. This can also be achieved through cost reduction or small-scale signing contracts. Alternatively, CEOs can consider raising the anticipatory funding, even if in the business world, they might defer a raise in the pursuit of higher valuations.
- Funders of startups are well-positioned to buffer against a fever state of startups. Providing leadership for early and anticipatory fundraising can support the stock-piling of the dry powder to survive a prolonged siege by coronavirus. It also promotes the creation of a war chest, which may allow startups to adapt itself under abnormal circumstances.
Furthermore, funders can leverage the expertise and networks to share the learnings on dealing with similar challenges, therefore cultivating an ecosystem of resilience for the potentially inexperienced leaders during tumult associated with the COVID-19 virus.