A look down on history shows us that crises are opportune times for new ideas, innovations and systems. Some of the most famous companies today were launched right after the 2008 economic crisis. Some notable examples are WhatsApp, Uber, Groupon, Slack, AirBnb and Groupon.
The economic crisis caused by the coronavirus pandemic may seem challenging and terrifying, but the current environment can also be an ambitious time for entrepreneurs to launch their dream startup.
Presenting an idea and raising capital for your startup might be more difficult than before, but understanding the market and consumer needs (as well as your adaptability during a crisis) can help you stay in the game. Here are some practical tips useful to both existing startups as well as new startups planning to raise money in the next six to 12 months.
Be true to yourself
There’s no way around it; you need to be brutally honest. Ask yourself, what makes sense now? Have recent global events changed the relevance of my product and proposition? Does my idea still meet the same needs as before? Does the offer need to be updated according to the new reality? Are there any changes or adjustments to be made to the product, offer, technology, pricing, distribution channels or geographic areas I originally planned to address?
Research potential investors
Some investors are more conservative and, in times of crisis, they tend to hold onto their cash and suspend any new startup investment. Others are more adventurous and look for great opportunities with lower valuations. Others still are somewhere in the middle of these two types.
Try to evaluate which of these types of investors best describe the ones you plan to pitch to. If the meeting is with a venture capital (VC) firm, you should find out when the fund was launched. This will help you determine at which stage of their cash distribution cycle they are at. For younger funds that are only one or two years old, they will actively seek to invest. The crisis should, therefore, be a great time of opportunity for them since most companies’ valuations will drop.
However, many of these funds will also want to mitigate risk by investing in more mature companies that have a clear path to profitability. As you will do on normal days, you should also make sure that the VC you are meeting is interested in the space you are active in and, ideally, has already made an investment in this vertical.
Think like a camel, not a unicorn.
Camels can survive in some of the harshest climates on earth. They are hardy and can survive for many weeks without food or water, continuing to run fast when needed. On the other hand, the mythical unicorns in the business world are focused on rapid growth through deep funding and an accessible talent pool.
Be open and transparent with your investors. Make sure they are fully aware of your company’s situation. They will certainly need to know about changes in the market you operate in. Be sure to include information about challenges you are facing, updated revenue projections, and a list of realistic short-term startup investment and future financing needs. You can only get this information through market research and thorough business planning.
Prepare for post-crisis growth
Make sure you have a complete operational plan ready for the moment when things get back to normal. Make sure your business plan reflects how you will adapt as the skies clear and your business grows. The uncertainty caused by the pandemic will not linger indefinitely. You need to show investors that you are already planning ahead. It is easier to get startup investment in challenging times if you have a plan in place for when things get better.