Corona: Impact on Startups
Such a crash in the market could have a catastrophic impact on the startup world.
Startups mainly rely on two things:
- Funding
- User growth
Impact of Lack of Funding
During such uncertain times, the money dries up. No one wants to make new investments, which they would otherwise do during regular times. Everyone will be saving for rainy days. People are more apprehensive when there is no clear end in sight.
Many startups, especially B2C, rely on VC money to sustain. Such startups will suddenly find it very hard to conduct business as usual since new capital will be hard to get. Such a situation could lead to small to mid startups going bust, and mid to large startups scaling down operations significantly.
Also, even the startups with money will evaluate their products and the number of people and take this opportunity to trim down slack. Trimming down will help them last longer if the situation does not improve.
User Growth Challenges
With cities under locked down, it will be hard for new startups to scale up and find customers. E.g., gyms, mobility (Ola, Uber, etc.), travel, etc. A lot of business depends on people being out of homes. The lockdown will mean many new startups who are still trying to evaluate their products, prove their prototypes, etc. will be very hard hit.
Impact of Travel Restrictions
Another significant blow is the travel restrictions. A lot in business depends on the ability to meeting people — having coffee/beer, brainstorming, validating ideas, interviews. While online meetings and video conferencing will help a bit, but nothing can replace face-to-face meetings for building relationships and rapport.
Summary
This is a challenging time for many businesses. How they conduct themselves during such times, help their customers, users, and employees sustain during such difficult times will define who will be still left when the situation improves.
