How startups need to re-evaluate their finances
The recent global financial tsunami has had economic consequences that have not been witnessed since the Great Depression. All major sectors have witnessed severe recession or depression as operations were suspended for major parts of the last 3–4 months. These are testing times for companies, especially early stage startups as they rely heavily on external investment for growth. To combat this financial crisis, startups need to re-evaluate their focus and strategy towards the market.
- With great power comes great responsibility. Lead from the front
It starts with the leadership and core management of the startup. Everyone is nervous in such an environment and it is important for the leaders to establish honest and transparent communications with their employees, customers and stakeholders. - Focus on your game, you know it better than anyone else
Continue to invest in the product and keep making it better for the end customers. If needed, pivot the marketing strategy in a way to entice more customers. Look at this scenario as an opportunity to try new things. One of the positives that came out for us, at Calamus is that, during this fiasco is that the global demand for e-bikes has spiked and that has resulted in an increased sales over the last 4 months. However, due to the global supply chain delays, there has been a pile up of orders. Being an early stage startup, financially it wasn’t possible for us to have inventory for 3–4 months and that has caused major delays and unrest among our customers. - Cut back expenses, cash is going to be your king
- The goal should not be extravagant growth but to survive and grow sustainably. Remember that cash is king. You want to maintain liquidity and reduce your burn rate as much as possible.
- Hold back on R&D expenses and reduce unnecessary marketing spends
- Unless extremely important, freeze or limit all hiring activities.
- Re-negotiate rental terms. If major companies are doing this, so can you
- Delay payments to suppliers except the most important ones. Your suppliers will understand the impact of this crisis and are likely to extend your payment timelines. This might seem very unethical but when it comes to survival of your startup, you need to take drastic measures. - Seek help from your government, it’s going to be tough but don’t give up
Seek government support in terms of cheaper loans, investments and other benefits. Governments all over the world have launched COVID-19 care packages in order to revive their economies. Our suggestion? try to make the most of this and apply for these loans and credits. - Fundraising, if that is going to be the difference between staying alive and closing down
Seek equity investments from investors who are willing to bet on you and your startup. Even though this crisis has disrupted the venture eco-system, there still are many players who are likely to invest in your startup. That being said, don’t be stuck up on a fixed valuation, be realistic with your valuation. It is likely that potential investors will take this opportunity to invest in startups at a discounted valuation.
In such tough times, it is important to remember that some of the biggest names in the startup space today, were born as a result of the financial crisis that took place in 2008–09.As they say, what doesn’t kill you, makes you stronger.
At Calamus, we have created the next generation of electric vehicles starting with electric bikes. Based in the heart of Mumbai, Calamus is creating the smartest, safest and the most beautifully crafted electric assisted bikes for the global audience.
