The current global pandemic has been a cataclysm for a great deal of businesses. All the sectors of the economy and all types of businesses have been affected. But how has it affected start-ups in particular? Will start-ups manage to survive this unprecedented crisis? Denis Gallot, director of the Start-up lab, offers insight into the solution.
Do you think that start-ups can successfully emerge in the post-crisis environment?
There is a genuine possibility that household consumption will change after the pandemic. Actually, consumers have realised that limiting their expenses to what is strictly necessary had a marked impact on their wallets. That caused some of them to reflect on their own ways of consumption or overconsumption.
The challenge that has come about for businesses will be attracting their customers back again (or new customers for the first time), maybe those who are less inclined to make impulse purchases. In this context, small businesses, particularly start-ups, will naturally find it easier to adapt their business model in order to catch up quickly with new expectations and question their communication and operating methods. A good example is the start-up Gratitude that sells 100% “Made in France” linen shirts. It launched a crowd-funding campaign in the middle of the confinement and largely surpassed its funding goals. Is that a post-crisis aspiration? Additionally, small businesses have fewer factors that are likely to impede them from adapting such as having shareholders to convince or major payroll expenses. It is indeed likely that start-ups can take advantage of the post-crisis situation!
But doesn’t size guarantee stability?
In my view, not necessarily. Rather than company size, it’s cash flow that counts. This is the factor that allows companies to handle expenses and contingencies. Currently, little or no revenue at all is a determining factor for the survival of the company. In this one point, large businesses seem to have a major advantage. However, they are also confronted by significant expenses (loans, wages, etc.). Their structuring is also less agile and very likely more resistant to change during a restart phase. But, as previously described, adaptations seem unavoidable for meeting new expectations.
It’s true that not all start-ups have a large nest egg behind them, and that will not be easy. However, they have much more wiggle room in terms of expenses. They can reduce, postpone or even cancel them…
Do start-ups then have real advantages in this crisis?
Today, the vast majority of start-ups carry out their activities fully in step with the digital age. Their activities are thus better adapted to shift successfully into telecommuting without counting on their teams’ digital skills and avidity. Start-up entrepreneurs did not need the pandemic to show interest in tools such as Zoom, Trello, Teams and other Slack-like technologies, while these technologies serve as a digital revolution for a good amount of “classic” businesses.
Agility and the ability to quickly and easily finding one’s footing in new markets is also an advantage that can tip the scales in favour of start-ups, much like the possibility for them to achieve less overhead for communications by using today’s tools. For example, there is Bulkee, which offers bulk food purchasing at collection points. It shifted its offer towards 100% home delivery.
To finish, it’s clear that there is will not be sunny skies on the economic horizon for multinationals, large companies, SMEs or start-ups. However, it would seem that start-ups have sufficient advantages to come out with fewer losses than others in this crisis.