The Coronavirus has put tremendous pressure on small and medium-sized businesses (SMBs). For startups, in particular, this is a challenging time to keep moving forward while attracting (much needed) investment.
For tech startup vying for an injection of capital and mentorship, the process has also changed overnight. For example, the 12-week startup accelerator program, Intel Ignite, led by Intel in Tel Aviv, carried out the entire final interview (and selection) processes remotely.
But it’s far from ideal. Virtual selection processes via Zoom, for example, lacks intimacy. In this scenario, founders and innovators risk not having the same impact as one would have (engaging an audience) in a physical setting.
There aren’t opportunities for mentors and judges to interact with people, so networking is much harder. But although this process is much arduous (to say the least), it doesn’t mean that it’s impossible.
In times of crisis, those who survive, adapt. They identify what works, optimise it, and set the stage to grow and prosper, even during a pandemic.
The situation on the ground: a drastic drop in confidence
For startups and SMBs, COVID-19 has been a rude awakening. And this is especially true for those who didn’t qualify for the emergency business loan schemes like the Coronavirus Business Interruption Loan Scheme.
If this wasn’t bad enough, the Office for Budget Responsibility expects the British economy to contract by as much as 35% in the second quarter of this year. According to the Studio Graphene survey of over 100 UK tech startups, as much as 38% stated that they were “not confident” or “not confident at all” of seeing growth in business turnover in 2020.
This had a domino effect on recruitment as only 58% were planning to hire more staff (a glaring 33% drop from the same time last year). In the same vein, only about half (or 49%) hoped to expand to new territories offshore, an annual drop of 18%.
Another 69% had significant doubts about the British government’s ability to support UK tech companies through the crisis. While all this paints a future that’s quite bleak, the reality promises to be different.
The situation on the ground: not all doom and gloom
After mounting pressure, Chancellor Rishi Sunak and the government have offered small British businesses 100% government-backed rescue loans. Although it took weeks and a lot of criticism from the startup and business community to make it happen, emergency loans are now available.
Cash-starved small firms can leverage the new “bounce back loans” with full government backing to ensure business continuity. In this scenario, small businesses can apply for “micro-loans” worth up to 25% of their turnover, or up to £50,000. While it (certainly) isn’t a lot, it can help keep small companies afloat.
The British government also announced plans for a new “Future Fund,” specially focused on high-growth startups in the country. In this scenario, the government promises to provide loans between £125,000 and £5 million to qualifying startups.
Launched in May and expected to run through September, these plans aim to provide enough investment to ensure business viability during the pandemic and economic downturn.
The British government pledged a total of £250 million of taxpayer money that took the form of a convertible loan note. Startups are also tasked with securing an equal or higher amount to match the funding from private investors.
Although the applications are open until the end of September, the fact that the fund will be kept “under review” strongly suggests that more taxpayer money could be committed in the future.
Pushed by some of Britain’s high-profile tech and business leaders, these loans will also automatically convert into equity in the company’s next funding round (or at the end of the loan if the debt hasn’t been repaid).
The situation on the ground: a fantastic opportunity to thrive
While the new norm brought on by the Coronavirus may have felt dark and isolating, there’s still a silver lining. When businesses take advantage of the help on offer and get creative, these pandemic days can set the stage for greater innovation.
For example, if you’re operating a direct-to-consumer online sales platform, the current environment provides the perfect opportunity to get a facelift and update it. It’s also the right time to optimise internal and external processes (like logistics) and use technology as a tool to help serve the customer more efficiently.
If you’re operating a digital marketing firm, this is the right time to get imaginative with your funnels and maximize conversions. After all, you have the whole country’s undivided attention across devices.
If you’re a technology company, it’s the right time to beef up or reimagine current product functions and features or even start building new ones.
To overcome budget constraints, it’s vital to apply for available loans like the Future Fund. In the meantime, you can offer pay cuts and equity to your core team in-house (and furlough others) to keep cracking on.
To fill the talent gap and make better use of your budget that’s supported by loans, it’ll serve the UK startup ecosystem well to build extended IT teams remotely in Eastern Europe, especially in Ukraine.
As a wealth of tech talent is available and already used to working remotely, so you can hire ad-hoc remote resources to assist your core team.
Because the tech talent pool is much larger (when compared to Britain) and the pay rates are as much as two-times lower, this could also be a viable solution for the long-term.
British SMBs and startups must change their thought process from surviving to thriving. As the access to government-backed loans is now available, remote tech talent’s affordable, and venture capital’s still accessible via video conferencing, the foundation is set to innovate, scale, and boost their bottom line.
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