New Normal//

Post Covid-19: Shake-out of the Entrepreneurial Ecosystem

What will it take to survive and Thrive?

Photo by Surbhee Grover
Photo by Surbhee Grover

For entrepreneurs, coming out of COVID-19 isn’t the end of a crisis. It’s the beginning of a new way of thinking about their approach to product-market fit, financing, marketing and go-to-market strategies. And for some, will be a time to reflect on their personal approach to risk. The exponential pace of change to society will mean that only those entrepreneurs who have the greatest ability to adapt will survive. 

Framing how the world will be different is important, as these differences will both unlock new opportunity and create new goalposts for innovation, user adoption (B2C and B2B), team building, product-market fit, and venture funding. We believe a few things will be true:

Cautious Confidence: Users will be both excited about returning to their communities and spending money, and also skittish. Their trust in and relationships with brands will be fundamentally different. New cues (for example, sanitiser by a storefront, gloves on employee hands, and authentic post-COVID mission statements) will be required to create and nurture a strong brand relationship.

A Reworking of Purchasing Behaviours: Users will have developed new buying habits, shifting from in-person purchasing and experiences for categories like fitness and food, to near-exclusive online and home-only engagement—and their spend will have shifted (or been curtailed) in parallel to only those purchases that are seen as necessary.

Migration of Talent and Teams: Many industries will not recover to pre-COVID hiring levels, and many start-ups will choose to close their doors as funding becomes scarcer. Workers in these areas will be forced to pursue new directions and new skills in different fields that maintain relevance, such as video conferencing tech, e-commerce operations, and ground/ last mile delivery services—as well as education and training services.

Re-imagined Supply Chains: Global supply chains will have re-wired, or even merged, across B2C and B2B channels and throughout value chains, such that only those companies with an ability to nimbly stand-up and leverage modularity, strategic partnerships, and flexible operations will be best poised to succeed. 

Deeper Data Needs and Sources: Digital data will have quintupled, unlocking even deeper insight into what users really need. Businesses with access to big data analysis capabilities will have an edge. Platforms such as gaming, social channels, video conferencing, fitness providers, and delivery networks (to start), where consumers are continually aggregating, will emerge as valued sources of raw data and insights.

A New Lens on Business Value: Business value will rely more on cash and less on credit, after many consumers and businesses felt a tangible and sustained “crunch” from lack of liquidity and job losses. Credit will be harder to secure, funding will rely on proving a stronger cash runway, and risk tolerance will have declined across the entire start-up ecosystem. Start-ups will have a higher bar in proving out value in order to secure funding, or have to be self-funded to get off the ground. 

New decision-making inputs and new market sensing tools will be required to survive in the new economy, and entrepreneurs will need to make faster, smarter, more forward-looking decisions to better position their ventures for success across six key dimensions: 

1. Re-orienting product-market fit to new reality

* Learn and adapt to new consumer priorities and behaviours quickly, both in what they offer and how they offer it, to win users and revenue. For example, quarantine orders have led to more home cooking. Older populations who were previously resistant to meal kits have started developing new habits using them, in exchange for convenience and safety. What other digital opportunities with this historically hard to convert segment might emerge?

* Predict regulatory changes to maintain safety and confidence. The widely anticipated SBA/PPP loans ran out in less than two weeks, leaving those that waited to apply, stranded. Many restaurants in Los Angeles operated as “grocers” for some time after ‘safe at home’ orders were issued, only to be shut down because they could not meet WHO guidelines. Entrepreneurs need to be hyper-aware of both new opportunities and new restrictions and be able to react and adjust their models as needed. 

* Re-assess market position and potential. With conventional revenue streams disappearing, the question is—what else can you do with your assets/ capability set? For example, OxBlue, a company that provides professional construction camera services for monitoring activity on construction projects, is pivoting to create AI technology to detect and implement social distancing on construction sites. 

2. Tapping into potentially unconventional collaborations

* Leverage co-opetition: Small businesses/ entrepreneurs now working with leaner operations/ staff are better off leveraging pooled resources, and complementary capabilities—for example, businesses who usually compete might combine local delivery orders and promotions, and/or co-hire R&D insights and supply chain managers (which are usually expensive) to maximise resources and infrastructure. 

* Activating flexibility and nimbleness in IP: The ability to connect IP across open-source platforms is a new differentiator, driving faster innovation and routes to market—as evidenced by Apple & Google actively partnering for COVID relief efforts using their unique technology strengths.

* Expand the power of community.  Whether it’s a neighborhood looking to protect a favorite boutique or corporations making tools available to entrepreneurs, COVID has resulted in new resources becoming accessible to small businesses that were previously beyond reach. For example, Atlanta-based Shadow Ventures, an incubator, accelerator and venture capital firm, is offering its proprietary, closed platform to start-ups for free for a period of time. As a result, corporations and VCs get a richer pool of entrepreneurs, and the start up community becomes stronger and more innovative.  

3. Accelerated learning and pivoting

Given the uncertainty in timing and outcomes, the speed with which start-ups can digest insight, experiment, and learn matters more than ever. For example, Peloton, as early as mid-March, started offering new app subscribers a 90-day trial (versus 30 days) as a means to tap into the increased need for at-home fitness. Start-ups who move to action with learning plans in place can quickly understand market dynamics and move as the market moves. 

4. Building loyalty in the here and now

* Flexing user communication and engagement to reflect your brand’s authentic role.  The relationship with the user (consumer/customer) is more important than ever before, but messaging that is not sensitive to social context will backfire. As attention shifts away from fear of COVID to fear of economic issues, understanding your brand’s role in the user’s life is critical. More frequent audits of the communication calendar, mindset-focused user research, and authentically speaking to users’ new reality are essential adjustments. 

* Nurturing talent and workforce loyalty. Maintaining the physical/ mental health and safety of workers is now table stakes. Companies who on-board with sensitivity and maintain transparent conversations about employee health will win loyalty even in difficult times. As workforce shifts occur (e.g. due to decline of brick & mortar retail), companies’ ability to attract and re-skill a new set of talent could earn them a competitive advantage.  

5. Aggressively manage cash and cost structure

* Stress-testing revenue models. Upfront revenues versus funding over time provide for dramatically different stability options when a crisis hits. Understanding the cost base of a venture over time should inform the revenue model a business pursues. Start-ups that over-optimistically leverage credit or heavily invest in assets in early phases run the risk of not being sustainable. For example, The Wing, an entirely membership based model, furloughed 95 per cent of their staff when their revenues evaporated overnight, spotlighting their reliance on monthly (versus annual) membership fees to fund monthly real estate, staff, and operations across 10+ locations.

* Redefining investment metrics. A recent spate of start-ups were funded on the charisma of their founders, not on the validity of their business cases. Trust in their revenue projections and cost models drove significant investment. Yet, nothing in the current VC toolkit assessed crisis stability (a ‘CS’ score of sorts). Companies like Kabbage, which promised credit and working capital to SMBs who could not otherwise secure funding from ‘big banks’ were left empty handed when every credit line dropped to zero the day after ‘shelter in place’ orders started going into effect. Meanwhile, Chase, a ‘big bank’ turned on three-month mortgage deferment virtually overnight. A ‘CS’ score, may become necessary, to secure VC funding, and avoid the outcome many Kabbage customers have experienced.

6. Re-configuring supply chains to be modular and agile

This will determine survival and inform brand/consumer perceptions, and entrepreneurs who create flexible operating models will be in a stronger position to deliver against new opportunities. Companies like STORD provide ad hoc warehousing so that companies aren’t forced to sign long-term contracts for space. Some vectors for reorganising will include: 

  • Diversifying the supplier base, focusing on building strategic partnerships
  • Nimbleness and modularity across the value chain 
  • Greater vertical integration 
  • Greater localisation/ proximity to domestic markets—not just for security of supply, but also for consumer perception. “Made in XX” will matter again.


The future is complicated for entrepreneurs, but still bright. Doors are closing while others are opening. Entrepreneurs who look for the open doors, and continually assess, learn and adapt, will be the future. 

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- Marcus Aurelius

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