Technology Startups under COVID-19
The technology startup investment scene has changed radically due to COVID-19. Some industry sectors will be plagued with bankruptcies and poor ROI for years. Others will come to the fore as community perspectives realign to new paradigms. It is amazing how many purported “solutions” are hitching their wagon to COVID-19 challenges and are spruiking that to the market.
For investors, looking for the next Unicorn is now much harder and yet more focused. Instead of scanning 300 possible new ventures, the strictures surrounding COVID-19 and the slow path to full recovery will necessitate culling up to 90% of potential new ventures who would have possibly obtained capital funding under the prevailing conditions of the last couple of decades.
In some sectors the disruptors have had a quantum leap and become the norm, with traditional processes and distribution models falling away faster than ever. The core affected sectors of this new re-alignment of paradigms is now being referred to as BEACH: Bookings, Entertainment, Airlines, Cruises, and Hotels. However, I am also going to put Retail in there as well making it BREACH.
The new paradigms will be mostly about the priority of decision-making dependencies such as
· Trust, both from a financial and a health perspective. Will this business be around tomorrow and in the future? Can I put my health and well-being in their hands with confidence?
· Remote access/mobility. No matter where I am or what I’m doing, can I always have access to the products, services, and support I need without going to a location, having to jump over hurdles, or waiting inordinate amounts of time.
· Data insight. What do I need to know to give me confidence in transacting in a particular manner or with specific businesses?
If your startup’s value prop is addressing the BREACH sector, then you’d better have something which facilitates the new paradigm. Just consider the following trends which have been brought into focus by COVID-19.
1. Restaurants v takeaway
a. Deliveroo and others are now the default, not the secondary alternative.
2. Travel
a. Cruises are out of favour, packaged tours will be secondary, and personally customised itineraries will increase.
b. Airline routes and schedules will be restricted for some time, perhaps years, thereby providing fewer travel options.
3. Retail
a. Much more online with the late players to this now having few other options.
b. Minimising distribution costs while maintaining customer service efficiencies is paramount.
4. Booking agencies
a. Who can you rely on?
i. Reputation, credibility: no longer can they say all care but no responsibility.
5. Entertainment
a. Shift from over-crowded venues to more personal gatherings.
b. Move to even more online entertainment.
6. Property
a. Site inspections and real estate agent liaison will be much lower priorities.
i. First port of call will be online “tours” of pre-selected properties.
ii. There is a large amount of data now available for any specific address with new data rising in importance eg, is the property in a high mortality risk area for a re-emergence of COVID-19 infections, where are the local health support services, what is the school catchment feeder zone, is the property at high risk of bushfire?
iii. As a result, real estate agents may lose prominence and in fact may become a secondary channel in future for buying and selling, the primary channel becoming person-to-person online.
Given the above possible trends, where does your value proposition fit? Is it part of the solution to the changes that are occurring, or has your solution now become part of the COVID-19 problem? For example, if your solution aligns with co-working workspaces, perhaps that is now much less relevant due to working from home arrangements put in place under COVID-19. Similarly if your plans were to launch a new travel booking aggregator website. This may not necessarily guarantee failure, but you will find it extremely difficult to secure investor funding.
In the alternative, if your startup is in personal health monitoring, telehealth, remote working infrastructure, geospatial data analysis (location intelligence), or supply logistics, then you have a much higher chance of attracting investors. Of course, you will still need that differentiated value proposition which sets you apart, so good luck!
