Startups in the time of the virus: Lessons from China
While things start to go back to normal in China, the virus crisis continues to unfold across the globe.Silicon Valley is shutting down as local governments order people to stay in their homes. Small and medium startups are likely going to be slammed seriously, both by quarantine and the resulting economic downturn.But startups can learn from their peers in China to combat new challenges.
Recently we talked with several of our portfolio companies about the epidemic and how they were coping.
- High performing employees will showcase their value.
- Companies managing teams remotely must balance work efficiency with being supportive.
- A cash flow crisis is a good opportunity to prune costs and unpromising investments.
- Clients and partners will remember companies that showed dependability and credibility in times of crisis.
- It’s important to upgrade products for new demands, but keep in mind the importance of user experience and product quality.
Stablize internally before you stabilize externally
At the end of February, up to 3 million merchants were affected by service outages at Chinese commerce and marketing service provider Weimob after an employee allegedly sabotaged the company’s database. Weimob attributed the incident to “the company’s negligence regarding the employee’s personal mental health while working remotely.”
This is an undoubted wake-up call for companies. As Andre Gisiger, co-founder of leadership coaching startup GloCoach, told us, “Crisis management is all about stabilizing the situation internally before you can stabilize the business externally.”
Cultivate Team Culture
For founders, having the team work remotely allows them to identify whether or not their employees remain productive. This is also a chance for team members to learn new skills. At BuzzKid, a peer-to-peer English tutoring platform, the product leader organized internal product training sessions for the whole team. “I hope everyone is versatile—a sales person also needs to understand operations,” founder Shirley Wang said.
Different opinions on remote work
Early-stage founders also need to actively communicate with each team member, said Wang: “While working remotely, the founder is in the center to connect all dots within the team.”
Lu Guo, founder of Ushopal, which helps overseas new luxury brands enter China, extended the holiday for its employees for two weeks, “I also hope my team can spend more time taking care of themselves and their families during this time.”
Material incentives and emphathetic support
Gisiger told us: “we asked about the challenges they were facing; we asked people that were traveling if they needed any local support.”
Wang shared her daily schedule and exercise courses on Keep (a Chinese fitness and training app) with the team, and also shipped facemasks to employees.
At TravelRight, a company that helps passengers claim compensation from flight delays and cancelations, material rewards are offered to employees whose support the company relies on to get through this tough time. Founder Sophie Sun promoted several employees to the core team.
“Cashflow is key“ for startups
The coronavirus outbreak will exacerbate any internal cash flow problems. We’ve all heard stories about companies struggling to survive without revenue coming in.
Sun warned that startups make overly aggressive expansions after successful fundraising. “After burning out investors’ money, founders have to burn their own money in the face of uncertainties,” she said. “Cash flow is always the key for business.”
Guo recommends taking a close look for wasteful spending. Founders are likely to be “surprised by how much waste there is,” whether it’s for recruitment, office leasing, or buying IT products.
The harder decisions are about investments, but a crisis makes it necessary to bite the bullet. Ushopal has suspended several profitable projects in recent years. “We needed to stop making money that is not worth making,” Guo said. “Our focus is not only on cost, but much more on the company’s energy, time, and culture drain.”
Focus on existing clients and partners
It’s not the end of the world if you cannot sell to new clients.
After many years of managing business development for corporates, Gisiger suggested that founders further develop relationships with existing clients rather than looking for new ones: “They already trust the value your company provides.”
What you can do is to actively support clients. GloCoach organized several free online webinars to share experiences with crisis management and explain available government subsidies. The companies that can operate healthily and provide additional services in times of crisis will build credibility among clients.
Upgrade the product for new needs
The epidemic has accelerated the digitalization of traditional services.
Atiom, a company that makes gamifed employee engagement and training app, has developed new training modules that allow companies to quickly train teams on protecting employees and creating safe workplaces.
BuzzzKid also discovered new demands when Wang talked to offline education and training institutions. She learned that they were struggling to quickly develop online platforms.
The BuzzKid team responded with two new services. One helps offline training institutions connect with online platforms so that they can quickly move their content online. Additionally, BuzzKid launched new online English teaching courses that can be directly leveraged by those traditional institutions.
But in contrast to predictions of rapid growth in online education, Wang warned that customers are likely to be conservative: “There are more opportunities created for leading companies. The positive influence on small startups is very limited.” Most leading companies get users through online advertising, while early-stage startups will struggle to afford the costs.
Will the positive impact outweigh the disadvantages? Wang pointed to DingTalk’s outbreak of one star ratings: “if the supplier can’t provide a good service and the online courses are of poor quality, it will actually decrease the user demand after the epidemic.”
Be “cockroach” startups
SOSV looks for what General Partner William Bao Bean calls “cockroaches”: “I want to work with cockroach-entrepreneurs. Step on them and they might lose a leg or two but get up and keep on going. They never give up.” And we hope to see more cockroach-entrepreneurs in the face of this crisis!
This article is written by Eva Shi, Communications Manager at SOSV Chinaccelerator. Thanks to our founders for the time. They are Shirley Wang, founder of BuzzKid; Matthew Spriegel, founder of Atiom; Andre Gisiger, co-founder of GloCoach; Lu Guo, founder of Ushopal; and Sophie Sun, founder of TravelRight.
This article was firstly published on Technode.