Q2 & The Future Post COVID19: Investor's Perspective
Arvind Radhakrishnan (Labs Manager, WeWork Labs) and Vivan Puri (Co-Founder, WorkNetwork.in), warmly welcomed Ashesh Shah (Partner, TCVF and Angel, Stanford's Angel's), Ankur Warikoo (Founder, Nearbuy.com), Ninad Karpe (Founder, 100X.VC) and Vinit Bhansali (Vice President, Orios Venture Partners). An interesting conversation began. Below are the key highlights: Challenges and future navigation for founders
Ashesh Shah stated that the coming 12-18 months were bound to be tough for start-ups. Capital would grow scarcer, and VCs might have to deploy the remaining capital towards their existing companies. Start-ups need to hunker down and focus on basic survival. It is essential for start-ups to look internally, majorly on cash flows. Managing cash flow, saving on newer investments like hiring extra workforce, etc. should be their focus. Human capital proves to be an asset as well as a liability at such a time. Founders need to regroup and work on their business plan to map their cash flows. Economic impact in India and abroad
Ninad Karpe recalled giants like Microsoft and Google emerging winners from previous crises. It is bound to happen that some firms pick up momentum at such times. However, these cannot be exactly compared since it is a health crisis, bringing with it a lot of worry and uncertainty. The risk factor is somewhat inbuilt for investors, but not that of uncertainty. Founders should realize that this new reality comes with new challenges and also new opportunities.
Founders' focus within their start-up
The crisis has made it apparent that cash is of the utmost importance when evaluating a start-up, as stated by Ankur Warikoo. A profitable, sustained existence holds more value in today's reality than growth. This entire crisis has taught founders that they need to go back to basics. Their first and foremost responsibility will always be to be sustainable and profitable, which is the unit economics for business. The next 18-24 months will definitely deliver this lesson.
Founders' mindset in challenging times
Vinit Bhansali believes that founders know that things will get worse. Last month has shown all of us that very viscerally. Risks of entrepreneurship have become very apparent. After all, entrepreneurship is glamorous only after you go through it and not during. Founders often get distracted by getting new customers and features. However, today, the founder’s focus is not their choice. Now, they need to focus on their core customers for their very survival. Earlier, for many start-ups, unit economics only existed in excel sheets. Unless you are in deep-tech, you have to be very upfront with yourselves about your money and financial health in general.
Founders' responsibilities towards customers and employees
A CEO's primary responsibility is to increase shareholder wealth. According to Ankur Warikoo, the order of importance is as follows:
People are necessary resources which founders will need later to revive. The right company culture will support the firm's survival through tough times. When you consistently work on your customers and your product, profits might not be immediate, but these aspects will get you through an unprecedented crisis. Start-ups and layoffs
Vinit Bhansali believes that layoffs are about the employees and not the founder, who still has a job during the crisis. In his earlier experience, he went out of his way to advocate for his employees as much as possible. He also stated that founders need to be authentic with their employees and put in effort to help them through this process.
Impact of the crisis across start-up sectors
Irrespective of the sector, this is a unique opportunity, Ninad Karpe believes, when all the consumers are sitting at home, for they are easy to target. Thus, founders need to pivot themselves. While it is clear that there will be an online boom and industries like Travel and Tourism will suffer for much longer, the majority of start-ups today can pivot successfully to survive.
Employees' performance during COVID
Ninad Karpe states that founders need to ask for accountability; however, they also take into account that habits and lifestyle changes need time to set in. However, it is also the time to build something new. As Winston Churchill once said, "Don't waste a good crisis."
Recommendations to the government for start-up ecosystem health
Ashesh Shah states that start-ups add a lot of value by creating jobs and innovating. The government should definitely try and lobby for them. There is a dire need for an India-specific customized policy. Monetary policy can also be a short-term fix. Setting up stabilization funds can help start-ups in paying salaries to their employees during these tough times. These loans can be either equity or come with long periods for repayment. Since it is clear that investors are wary and capital scarce during the upcoming months, the government should focus on fiscal policy which leaves start-ups with the ability to raise money after this crisis as well.
Founders and leadership styles
During a crisis, Ankur Warikoo says, people want to be managed. As a founder, it is absolutely essential to be authentic. With boundaries between work and personal life blurring due to working from home, it is the founders' responsibility to kill rumor mills, communicate more, and be honest about the firm's financial status. Rather than unidirectional communication, invite your employees to anonymously give you feedback and ask questions to create maximum transparency. At Nearbuy, employees are given forced downtime regularly so they can communicate and socialize despite distances.
Recommendations to investors
Vinit Bhansali believes that more than money, it is operational excellence and open communication that paves the way for investors and their start-ups in such times. A founder is there for the employees and needs the investor to be there for him/her in return. Investors need to change their mindsets and build authenticity.
Effect on various investor stages
Angel investing might come up higher, Ankur Warikoo believes. However, risk aversion is bound to set in. Ultimately, a well-formed product is the need of the hour from all start-ups. Vinit Bhansali believes that most investors will invest as a fiduciary duty to their funds, and this is a time when "fashionable" start-ups go out of style, leaving the truly passionate ones in place.