Chances for startups in economic turmoil
… or as Winston Churchill once said: “Never waste a good crisis!”
The Corona crisis has hit individuals and the economy hard. It goes alongside with uncertainty, general fears, substantial economic losses and insecurities on all levels of life.
As of today, the Johns Hopkins University has published a staggering number of 4.73 million corona infections worldwide, with an unfortunate 315.000 patients dead. In the United States alone, almost 1.5 million infections were counted and 90.000 patients have passed away. The unemployment rate of 14.7% in April 2020 equals 20.5 million of unemployed Americans and is the highest since 1948 when the U.S. Department of Labor started the monthly labor force statistics survey.
Corona crisis losers:
Some industry sectors have been hit harder than others. Travel and tourism services, carpooling providers, business travel support, event business such as trade show organizations or home rental companies are going through very rough times. The whole shared economy idea in times of ‘social distancing’ is facing tremendous challenges.
Needless to say, this is shattering.
However, a crisis can also have positive effects. We see habits changing. For a long time, the home office for the majority of companies seemed an inappropriate way of working. Now it is widely accepted and has proven its advantages.
Corona crisis winners:
The current situation gives us a glance at technologies that will play a dominant role in the future:
- Medical services & 3D printing
The request for digital health solutions is high. E-health and healthcare startups are dominating in the quest for new venture capital right now. Capital-intensive research for pharmaceuticals is also on the rise. Artificial intelligence-based solutions for fast-tracking research and finding cures show a high finance volume, too. An example is Google’s “Deepmind”, an artificial intelligence software simulating structures of the COVID 19 pathogen and thus enabling researchers to quicker understand how the virus works. And 3D printing is used to generate much-needed goods that are difficult to purchase right now, such as ventilators.
- Communication services & cybersecurity
Never before have remote working tools been so popular. Employees worldwide are getting more and more accustomed to holding webinars and attending team video calls. Real-time data and 5G internet are much-needed necessities and this crisis might finally help governments to bring fast internet to rural areas to avoid cutting off its people. As a consequence, this could, in turn, lead to the decentralization of hot spots and help with cluttered inner-city traffic, less traveling and more mindful use of resources.
Recruiting apps and edtech (education technology) tools are sought after, too. As a consequence, with so much personal data and confidential information on the web, the need for reliable cybersecurity solutions is high and that is another field booming at the moment. China and the U.S. are investing heavily in their respective artificial intelligence and blockchain infrastructures. Hence, to stay up to date and not leave the field to these two nations, this is another market chance for Europe.
- Smart robotics & delivery solutions and the automotive industry
Robots are assisting humans in areas, where it is dangerous for humans to be. Using robots to help cater to sick Corona patients is a growing business branch and is just in its humble beginnings.
Furthermore, automated delivery solutions with drones are on the rise. New concepts for services that cover the last mile to the client are being established. A whole innovative market is opening up quicker than we imagined.
It is interesting to see that the German automotive industry and the government are haggling over a new buyer’s premium (“Abwrackprämie”) to help the deeply affected industry sell more cars. If this tax money was instead used to push future-bound research of battery storage solutions or sustainable car technology not focusing on combustion engines anymore, it would serve the next generation so much more.
Tesla meanwhile is worth more than BMW, Daimler and Volkswagen combined. And Elon Musk just handed in another building permit for an additional plant in Brandenburg. Think innovation! This is a major chance for young companies and fortifying their efforts in that field will undoubtedly pay off in the future.
While spending lots of time at home and not being able to follow one’s usual hobbies and routines, many people are turning towards online services to work on self-improvement.
Fitness and meditation apps, online dating services and home organization and personal finance providers are extremely popular. The number of virtual subscriptions has risen by almost 35%.
How to be on the winner’s side:
So how can you make sure that you are on the winner’s side?
- Put profitability before growth.
- Secure what you’ve already got and go from there.
- Reduce everything to the maximum and question yourself what is needed and what is an unnecessary burden.
Try to answer these three questions:
- How can we stay relevant in the future?
- Is our product or service lean enough?
- What needs to be adapted or improved?
One of the greatest chances of startups is their short call to action. They can pivot their business model and steer their efforts into a more promising area of business. Luring clients with free trials might also be an excellent way of generating new leads.
Now is the time to do the homework for internationalization: when your home market is not responding positively enough, why not try to get your foot on the ground in another, bigger market? With unemployment being high in the U.S., it is a good time to shop around for talent, get to know potential business partners and use this unique chance, as the market is full of opportunities.
The easiest way of exploring chances abroad is by tapping into an already existing network overseas, such as the GACC New York’s network for example.
In the end, it’s a matter of the right mindset. Yes, there are obstacles and setbacks. Yes, this is a challenging and scary time. But this is also the beginning of a new era with chances, advantages and possibilities. If plan A doesn’t work, let’s develop plan B. As Winston Churchill said… “Never waste a good crisis!”
About STEP USA:
STEP USA is a 5-day startup boot camp offered by the German American Chamber of Commerce New York. A highly successful program, it focuses on facilitating US market access for young innovative companies and takes place 4 times a year. It also exists in a virtual format. STEP USA prides itself in having created a network of roughly 300 STEP USA alumni, more than 60 US incorporations and 35 investment rounds. It is tailored to the needs of startups who intent to scale their business internationally.
About the author:
Andrea Diewald serves as Director Innovation, Investor & Startup Relations at the German American Chamber of Commerce New York. She joined the company in 2011, holding various positions in HR, consulting and innovation services at the New York headquarters. As the GACC NY’s only representative located in Germany, she is now spearheading the Chamber’s startup, investor and innovation division from Hamburg and has established a wide network within the transatlantic startup world.