You’ve no doubt noticed by now that the COVID-19 pandemic has spurred a global recession. By some estimates, the world economy could shrink by 5.2% this year, making it the deepest recession since World War II. Despite this hardship, some companies look like they’ll emerge stronger than ever.
As lockdown restrictions start to loosen, some companies will thrive while others may sputter out. One of the areas where both extremities are most visible is in tech start-ups. As you’d expect, small businesses like these experience the highs and lows more so than others.
Here’s how tech start-ups are either succeeding or struggling in the face of coronavirus.
How Start-Ups Are Succeeding
You might expect the pandemic to be especially hard on small businesses. While that’s undoubtedly true for the most part, some, especially tech start-ups, have thrived amid the changes of COVID-19. Many smaller tech companies are uniquely suited for the post-pandemic world, sometimes more so than larger corporations.
More staff, inventory and complicated processes can make it difficult to adjust to a new workflow. As a result, tech start-ups tend to be more flexible in that area, but that’s not their only advantage. These businesses aren’t succeeding because of any one factor, but a few common ways.
Emphasis on Online Channels
With social distancing regulations in place, anything dependant on brick-and-mortar facilities took a hit during the pandemic. Many tech start-ups either don’t rely on physical stores or don’t have them at all. Since they were already used to operating online, some of their work is isolation-proof.
Most tech start-ups get 90% of their sales from online channels, even before the coronavirus outbreak. Other companies had to go through the complicated process of moving their business to the web, costing time and money. Since tech start-ups already had online stores in place, they could meet people’s needs sooner.
Creative Solutions to Problems
You probably wouldn’t start a tech business unless you had an original idea for your product or service. Since the COVID-19 outbreak brought some new or emphasized problems, unique solutions are just what the world needed. That demand puts some tech start-ups in the position to boost their sales.
Technology is an especially crucial industry during the pandemic since people need to do things remotely. By providing services like cloud-based platforms or AI, these businesses were ready to meet these new needs. Some start-ups happened to offer the right product for a situation like this, leading to a spike in sales.
Just because some tech start-ups have a couple of advantages doesn’t mean the virus didn’t affect them. Many, like other companies, had to make some changes early on to stay afloat during the pandemic. Their smaller size and online nature help many of these start-ups make changes more easily, though.
With fewer assets, there’s less you’d have to worry about when adjusting your workflow. A smaller staff means you can communicate these changes more effectively and quickly, too. Since tech start-ups are more nimble, even if they took some losses, they could recover from them faster than other companies.
How Start-Ups Are Struggling
Not all tech start-ups are surviving the pandemic quite so well. While many of them had the right tools and advantages to carry them through, a substantial portion hasn’t been so lucky. In a more predictable turn for a small business, some tech start-ups have found it challenging to stay afloat.
Even if some start-ups are surviving, most have taken at least some losses during the outbreak. One survey found that 74% of start-ups have lost revenue since the beginning of the crisis. When you consider the business disadvantages small businesses already faced pre-pandemic, it’s easy to understand why many are struggling.
Lack of Capital
Perhaps tech start-ups’ most significant disadvantage is a smaller cushion to fall back on. Even while taking losses, some businesses can survive the pandemic because they have enough capital to sustain them. Since start-ups have less money to start with, they run out of resources faster.
With a smaller business, changes in your profits will affect you to a greater extent. As a result, even if a tech start-up isn’t losing that much money, the losses could still threaten their business. For some, the profits they get from making some adjustments may not be enough to save them.
It probably doesn’t come as a surprise that people are less likely to invest in a start-up right now. Since money is tighter for a lot of people, investments that would typically seem safe are riskier. A lot of start-ups rely on investments, so this trend is harming the industry.
More than two million people work for start-ups primarily funded through venture capital in America. With so many people relying on investments, the decline in investors could hit some businesses hard. Depending on how long people step back from investing, many tech start-ups may not be able to avoid bankruptcy.
Tips for Start-Ups Coming Back From Isolation
Thankfully, not all is lost for tech start-ups amid coronavirus. Restrictions are starting to ease, so businesses can begin to go back to normal, or at least some semblance of normalcy. Surviving the coming months will take some work, though.
How can tech start-ups adjust to working amid the pandemic? For one, they can remodel offices and stores to enable social distancing. Before doing this, you should check your certificates and local laws to make sure your remodels are legal. You should also use data analytics to find ways to streamline operations and become more efficient. When you reopen, do so in phases to ensure everyone’s health and make any needed adjustments.
Keep sustaining online channels, even when brick-and-mortar locations open up again. People will still want to buy online, and you can hold virtual social events to keep morale high. Plus, you should take advantage of the cloud to stay flexible.
Post-Pandemic Business Won’t Be the Same
To say that the pandemic has changed the world is an understatement. For many companies, especially smaller ones like tech start-ups, business after lockdown won’t look the same. Whether the crisis has helped or hurt these start-ups, none of them will end in the same place they started.
Last Updated on February 3, 2021.