Is your startup Covid proof?

3 min read

After a long confinement period, the world is starting to re-open its economy. it’s unclear if it’s going to last, but one thing is certain, this world is not the old one.

Our certainties are no longer valid. We need to adapt, under stress, as we cannot imagine the future. It is true for people but for companies as well, including startups.

A startup is essentially trying to solve a problem by introducing an innovative solution. In this new world, the problem might not exist anymore. If it still exists, a new bigger problem might take precedence. So the issue is not going to be how fast sales, development, marketing can restart, it might be that no-one cares any longer about the purpose of the company.

B2B and B2C startups will be affected. Businesses are in survival mode and people’s priorities have drastically changed. In essence, the level of constraint on individuals and businesses has risen significantly. When that happens, only what really matters will get attention, large scale initiatives will likely slow down, nice to have is dead.

A brutal analysis needs to take place. Is your startup still relevant?

To answer the question, you must envision what your market will look like when the sanitary crisis is over. Then ask yourselves, how does my value proposition stand in this new reality? So stop running, slow down execution, and take time to think and analyze your new situation.

1- See the world from your clients’ eyes

First, try to understand the evolution of your core target customers. How bad they have been impacted will tell you how much they have changed. Let’s say your main client is the airline industry. They are no longer thinking of improvements and gaining market share. They are trying to survive, will likely let go of a lot of people, and have a lot of planes grounded for good. Boeing recorded zero orders in March and April. Anything you are trying to sell that does not impact the bottom line positively and quickly won’t be considered. If you are a B2C startup try to analyze if your target users are still financially safe. It’s comforting to be in the video game industry, however, if your core target is a segment of clients being crushed by the crisis, churn will happen.

2- Understand the new market dynamic

Next, try to think about the market and how it has evolved. A market is not just a volume of potential customers. A market is a living organism. It’s a mix of clients, trends, competition, partnerships, convictions, regulations, and initiatives. It’s probable that some or all aspects of the market have changed. Competition might be weakened, initiatives canceled, customer behavior will be different, your champions might no longer be employed, in a word you will be operating on a completely different ground.

3- Decide if your product/experience is still relevant

Last, analyze how critical your product still is. With the crisis, clients will make choices. A critical, high return on investment solution will win. Solving a new painful problem will win. Everything else will not. Don’t dream, be down to earth, either you have something very compelling or you don’t.

The crisis is a trend accelerator. Most startups are meant to fail. Thus, at this point, most startups will conclude that clients are in difficult or critical situations and that the startup value proposition has lost its appeal.

What to do if your value proposition has become weak?

The reason why your value proposition might not be strong anymore is probably that it was not strong enough in the first place. Indeed the crisis is accelerating, normalizing, and implementing solutions/platforms that existed but were only considered as option B. The crisis promoted some platforms to option A, Zoom is a perfect example. However it is not changing the value proposition dynamic, what was weak is just weaker.

You basically have 3 options to react to the situation, given you manage to have enough cash to survive. It is to be noted that not all startups are equal, early-stage might be more nimble that later stage.

1- Give up and close

Closing down your startup might be your only option. It’s hard, brutal, but stay honest, you engage your life, other people’s life, and money.

2- Create a completely different product/experience

If you still have cash and a motivated team, building something new to address new problems might be appealing. If this is what you need and want to do, do it right away, give up all things on the “old” startup, and immediately focus on the new one. You won’t be able to do both.

3- Adapt your product or business model

For the majority of entrepreneurs, they will think hard about leveraging what they have and pivoting to something new or slightly different. If adapting is an option, this might be a great opportunity to strengthen your value proposition.

As founders, your responsibility is to define, adapt, and execute the strategy of the startup. This crisis could be a life-changing event that drastically changes everything we believed in. It is the founders’ responsibility to run an honest and fair analysis of the situation and act accordingly. This should be something that founders are obsessed about, and they should spend 20 to 30% of their time on this very issue.

Pierre Gaubil Pierre has spent 25 years in France and Silicon Valley as an entrepreneur. Pierre successfully co-founded three startups and one fund, CAST, Days of Wonder, Sensopia, and The Refiners Fund 1. CAST went public in 1998, Days of Wonder and Sensopia were each sold. A seasoned entrepreneur, Pierre has spent over 15 years in the U.S. and managed companies in nine different countries. His expertise lies in enterprise software, mobile application, publishing, startup early-stage investment. Pierre is also a passionate drummer and music lover.

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