Pandemic Attack: Survival Tips for Startups during the Crisis

The COVID-19 pandemic has negatively impacted several business sectors, from retail to F&B. Among them are startups, struggling to stay afloat and generate incomes. However, this is not the end for startups. If you are looking for startup tips amidst the pandemic, Eddi Danusaputro as the CEO of Mandiri Capital Indonesia shared some of his wisdom in CEO Speaks on Leadership held by BINUS BUSINESS SCHOOL to help startup founders to survive during this crisis.

Optimize Your Team

Quality over quantity, a startup should have the guts to cut some costs in order to survive in the midst of the pandemic. The main roles within a startup are hackers, hipsters, and hustlers. Hackers oversee all of the technical support in the company, hipsters control the user experience with the design and marketing approach, and hustlers are the business savvy people that make sure the startup still makes money.

A startup does not need more than four founders. As long as the startup is able to maintain good communication and chemistry within the internal team, then there is still hope that your startup can thrive again after the pandemic. Remember, utilize each of the founder’s skills and work together.

Check Your Business Model

What makes a business turn into a startup? It is when the business model merges harmonically with technology. Begin by finding a core problem that has not been solved yet, and then create a scalable solution. There, you will have found the blueprint for your startup business model. First things first, design a business model that suits your startup. From how it will generate revenue, customer interactions, or value proposition, everything must be well thought out.

There are many types of digital business models. You can start by categorizing where your startup belongs. Is it within the realm of e-commerce like Amazon, or does it adapt to be an on-demand model like Airbnb? It is hard to keep the sales up during the pandemic since people change their shopping behavior and start spending their money on primary needs. However, see this as a momentum to reevaluate your business model.

Perhaps the subscription-based model is not working quite well during the pandemic. So, now is the time to modify your business model into a freemium one. Take a look at Zoom that has gained profits during the pandemic due to its freemium model. People get too dependent on Zoom and decide to purchase the premium version of Zoom after trying the free one. The most important thing is to learn more about technology as now more and more people do their activities online.

Is It a Good Time to Engage New Investors?

It is true that funding is a very important tool for startups to survive, especially during the economic crisis due to the pandemic. However, it may not be the best solution to start fundraising during the pandemic. As the number of your sales and prospective customers decreases, so does your startup traction. This will greatly impact your startup valuation which is the indicator used by investors to determine whether your startup is worth it or not.

If your startup is in need of more funding, an alternative solution is by publishing debt obligations rather than selling stocks. The catch is those debt obligations can be exchanged for stocks in the next 1-2 years from now, possibly after the pandemic. For startup founders, another tip is to always withhold at least 20% of stocks before reaching an IPO or acquisition. This way, founders still have control over the startup day-to-day operations.

Use the Right Valuation Method

As stated before, valuation is an indicator for investors to see how much your startup is truly worth. Contrary to common conception, valuation is not the amount of startup capital. It is quite tricky to estimate your startup valuation, though the most commonly used method is a comparable or multiple analysis.

The first step is to research five companies that are similar to your startup business model. Find out more about their performance indicator (revenue, EBITDA, or GMV). Afterward, determine the ratio of their performance indicator and market value. The last step is to adjust the multiple, depending on the startup progress.

Each type of startup requires different metrics. For example, e-commerce uses GMV, SaaS uses the number of customers and ARR/MRR, gaming startups use MAU/DAU and ARPU, whereas fintech companies use the total amount of loans disbursed and revenue. ** (E-PID)