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How Bootstrapped Startups Are Impacted by Covid-19?

by KEN
How Bootstrapped Startups Are Impacted by Covid-19

Are you struggling with your startup even after bootstrapping?

Well, in just a few days, the Corona Virus was spread in many countries and affected the lives of billions of people.

Covid-19 impacted everyone. Believe me, it is very difficult to run a bootstrapped startup even during normal times.

This pandemic made it much harder. Some startups are struggling with their business plan.

Others are struggling for the initial funding requirements to start a business.

It is obvious that you might have done a lot of research and planning and then suddenly there was a need to transform and work on your business plan.

That’s why in this article I have shared the covid-19 impact on the present situation, how your startup can recover from it, and what you can expect in the future.

This will help you to design and implement your strategies accordingly.

Let’s get started.

Impact On Present Situation

Impact on Workers

A lot of workers have to suddenly amend their work routine.

This includes remote work, working with social distancing, wearing masks, or working part-time.

Also, some of them are working on alternate days or have changed their professions for their livelihood.

Market Impact

A lot of companies have to bear the burden of generating low or no revenues.

Startups who anticipated and planned during this time would be able to survive in the coming years.

Planning will include revenue forecasting, extending outreach, and changing strategies.

Impact on Clients

Most of the companies were unable to retain and build trust for their customers.

Therefore, many companies started with discounts, offers, and complimentary gifts to attract and remain connected with their customers.

Colonel Harland Sanders, (Founder of KFC) quoted-

“I made a resolve then that I was going to amount to something if I could. And no hours, nor amount of labor, nor amount of money would deter me from giving the best that there was in me. And I have done that ever since, and I win by it. I know.”

Important Facts

According to Nasscom Survey – the impact of covid-19 was devastating on Indian startups.

It was found that 30-40% of tech startups have shut down their operations and are planning to close permanently.

Another 70% of the startups have less than three months of cash runaway to run their operations.

The value of investments in India was $1.73 billion in March 2019. It fell to $0.33 billion in March 2020.

The total decrease was around 81%.

Less than 50% of the companies were funded, that is only 69 companies were funded in 2020 as compared to 136 in 2019.

This was shocking that many investors pulled them back from closing their 6th funding round by the March 2020 end.

Even big successful giants such as Microsoft, Netflix, and General Electric saw a downturn.

How To Recover?

It took 3-4 years for the economy to recover fully after the 2008 financial crisis. This time the recovery is dependent mainly on three factors-

  • Implementing open-ended resolutions with other countries diminishing trade.
  • Options of Remote or alternate days work for every sector.
  • Financial reliefs from authorities to startups.
  • Focusing first on fast paying and easiest projects.
  • Planning a low-investment business to start.

Every startup should be prepared for any unforeseen circumstances. It is always better to plan than to fail.

Nolan Bushnell (Serial Entrepreneur) quoted-

“The critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but few decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.”

Also, with less money bootstrapped businesses should look for the maximum return on investment with proper timing.

For instance, Co-founders of Bark Social (Luke Silverman and Jeff Kurtzman) bootstrapped their business earlier and started fundraising later.

The timing was the most important factor. So, focus on the timing and plan for every moment that can turn out as a bigger decision in the later stages.

Expectations In Future

With the emergence of covid-19, financial conditions are unpredictable.

So, there is a possibility that funding for startups may become an important part of the future.

Bootstrapping could be challenging. The world has never been into this type of situation.

Many investors may prefer to deploy their funds only on existing portfolio corporations.

This will ensure these corporations can survive over the high tide of global crises.

Some startups will rely on direct international funding to ensure growth opportunities.

Press Note would be an important part particularly after the pandemic where a free and open business would ensure constant job creation and investment flow.

According to Colin Wright, (co-founder of Asymmetrical Press) –

“It’s easy to get caught up in the day-to-day hard work of running a business and completely forget that while solving problems and building something you can be proud of, you also have an incredible opportunity to shape the future.

Even better, you have the chance to meet amazing people and do amazing things along the way. It’s important not to get lost among the trees and forget about the amazing, beautiful forest you’re planting.”

Furthermore, there would be a need for an emergency fund for micro-business owners.

It would be important to plan for the adverse with your team.

You should focus on innovation and uniqueness to stand apart from other companies.

Wrapping Up

Bootstrapped businesses are in much more strain. There is no other option except to opt for fundraising from investors.

I know it is not an easy task to convince an investor but focus on one important thing.

Remember that startups are expected to observe heavy negotiations on deals. This is because the new investors will stress on bargaining or discount in value.

Further, this may result in delays in deal execution and closing. Investors would be more cautious before investing.

So, startups that are planning to raise funds will have to design an emergency plan that could cater to business possibilities during covid-19.

This will help their business to remain sustainable in the long run and scale high with higher returns.

Authors Bio

Claire Mark is an investment and strategic planning consultant at Alcor, a global investment bank. She’s best known for her insightful blogs on business growth, startups, small businesses, and investments. Claire also has a good network in the Finance industry, especially the investors’ community. Apart from her work, she loves to bake and go out for gadget-free nature walks.

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