With many countries already reopening parts of their economy, it seems that the global sentiment toward the future of the COVID-19 pandemic has become more hopeful. However, dealing with the pandemic hasn’t been easy for most startups, especially those in industries directly affected by lockdown measures, such as air travel and fitness-related companies.
Compared to last year, air travel demand plunged by 94 percent, hitting the lowest point during the crisis in April. In Australia alone, 71 percent of fitness-related businesses have not had a single client since March 23. With the concerns of a possible second wave lingering, it’s essential to learn how to confront the future and better prepare for any potential emergencies that could come up unexpectedly.
At TrainAway, a digital fitness platform helping travelers getting access to gyms all over the world, we experienced this impact firsthand, as our entire business model is dependent on the travel and fitness industries.
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Since we were hit hard, we figured we could use what we’ve learned in navigating the pandemic to help startups across all sectors:
The initial hard choices
At the end of 2019, we were preparing for the Tokyo 2020 Olympics and focusing our efforts on established tourism markets like Thailand. Before the pandemic, predictions about a possible recession were all over the media, and the sentiment was cautious, yet positive. As Investopedia referred to the situation, “The U.S. economy in 2020 will be like a BBQ grill about an hour after you’ve taken the steaks off—still kind of hot, but not blazing.”
Then in January, the virus started spreading. When the first restrictions started being put into place, the immediate reaction of many startups and businesses was to brace for a recession. This could come in the way of government assistance or VC capital, which became hard to acquire once the situation became worse.
Startups generally aim to change and improve the sector they establish themselves in. If their goals are met, this opens the door to more opportunities to find funding, through venture capital or angel investors. Startups are always in a transitional state, and entrepreneurs are resilient to change. This year alone, 28 billion dollars in startup investment will go missing because of the crisis. This lack of investments has led startups to make hard choices; for TrainAway, it was to shut down the platform.
A change of mentality
After lockdown measures took place, many startups entered a firefighting state, which meant doing anything possible to stay afloat, from cutting spending to finding alternative avenues to gather revenue. With this goal in mind, many companies decided to reinforce their online spaces to meet customer needs.
It would be wrong to say that every startup was struggling when governments imposed stay-at-home measures, as the virus hit each industry differently. Online services such as food delivery, telemedicine, gaming, remote work and streaming platforms had an incredible surge in users. For example, Molotov, a Paris-based streaming platform, won more users in a month a half than they usually do in an entire year.
For those surviving, this time also served as a restructuring period. In our case, it meant answering these questions:
- Why do we exist?
- What would we do now if we had to start over again?
- What do we have today?
- What do we know now?
Which brought us to the following three points:
- Act quickly: Swiftness plays to the advantage of a startup. After all, companies that depend on funding to operate are on a constant battle against time, and while the virus stopped operations, the clock was still ticking. For operations, this means cutting down on marketing budget right away or shutting down a platform in time to avoid greater losses.
- There’s no one way to do it: No two companies are the same – decisions that would apply to one would not translate to the other. So, the amount of spending cuts, freezing new hires, and looking for new revenue streams must be done case by case. Although there are similarities in the difficulties industry-related startups share, such as air travel- and fitness-related businesses, what makes startups distinctive is that, unlike small businesses, they are constantly trying to solve unique problems.
- Go back to the fundamentals and stay positive: Remembering why you started the company and exploring the ideas that previously secured success is a great way to guide decision-making in difficult scenarios like the current crisis. During challenging times, being inactive is the worst choice. While there’s always a risk involved in any decision made during uncertainty, a positive outlook is key to identifying viable opportunities.
Survivability and profitability
Funding conditions have drastically changed over the past several months. Depending on the industry, we’re looking at entirely different scenarios. However, it is in a startup’s nature to take chances and solve problems, and the pandemic has created a new set of challenges for our society to confront.
As Gustavo Vinacua, BBVA’s head of Venture Creation, said, “It’s likely that the next startup to hit the big time will be related to some kind of new behavior that has come to the fore during the crisis.”
For TrainAway, moving forward means looking at what we have learned from the crisis, how to be more aware of short- and medium-term goals, and why it’s fundamental to constantly observe new government restrictions and market trends.
There’s no one way to confront the current challenges, as every sector has been impacted differently, and solutions do not always translate between markets. For those struggling right now, it’s crucial to remember to always come back to the true essence of startups: being flexible, dynamic and not afraid of change.