VCs back startups that pivoted quickly during the pandemic3 min read . Updated: 07 Jun 2020, 09:32 PM IST
Both VCs and founders have to react fast to the new environment. They’ve switched from their growth hats last year to multi-hued adaptation hats
The post-pandemic world is a tantalizing mix of new challenges and opportunities for startups. Both VCs and founders have to react fast to the new environment. They’ve switched from their growth hats last year to multi-hued adaptation hats.
Take the case of Vertex Ventures, which has funds in the US, Israel, China, India and Southeast Asia. It led a series A+ funding round of $8.9 million in Malaysian startup StoreHub in January, before Covid-19 was declared a pandemic. StoreHub, whose cloud-based POS (point of sale) system helps restaurants and retailers digitize business, was serving 13,000 customers across Southeast Asia and wanted to use the capital to push expansion.
“They adapted their product overnight to enable food delivery because that’s what customers needed," says Ben Mathias, managing partner at Vertex Ventures.
It’s crucial for startups to maintain their customer base during the downturn. Some are accepting deferred or revenue-linked payments to stay with their customers through the hard times. StoreHub’s POS-integrated Beep Delivery app, which was developed in a jiffy, is an example of going the extra mile. The Beep commission is also lower than what the regular food delivery companies take from restaurants.
FOCUS: NEXT GENERATION
One of the worst-hit industries is hospitality. Mathias’ advice is to focus on product innovation and R&D in areas where sales and marketing efforts are unlikely to bear fruit. For example, Indian startup Hotelogix, which provides cloud-based hotel management software, may find it hard to persuade new clients to buy its product. But it’s a good time for the startup to build the next generation of its product with features like contactless check-ins for the post-pandemic world of hospitality.
Mathias points out to startups operating in badly-hit industries that many of their competitors may not be around a year from now. So, if they keep their burn rate down, and ride out the downturn, they may well turn out to be better-placed than earlier.
While most startups are dealing with delayed sales cycles or postponed payments as their customers are struggling, some are in the happy situation of experiencing a surge in demand. Vertex Ventures-backed Active.ai, for example, is seeing interest for its conversational banking product that lets customers interact via a chat screen or Alexa. “All financial institutions are trying to figure out how to operate in a contactless world," says Mathias.
Another portfolio startup, Ace Turtle, whose software helps brands accept orders on multiple channels, including ecommerce sites and its own online store, is seeing traction in the era of contactless commerce. Apart from enabling omnichannel orders, the software also helps with fulfilment from multiple locations.
Digital enablement is thus an area rife with possibilities in the post-covid situation, along with the more obvious spaces like distance learning and telehealth. Mathias also sees new opportunities for AI and IoT in view of the emerging requirements for contact tracing, facial recognition, security and factory automation.
Remote work is the new normal. So it’s not surprising that collaboration tools like Slack and Zoom, which were in use before the pandemic, have taken off since then. But other than these well-known ones, there’s a whole range of tools to help enterprises cope with a distributed workforce and enhance its productivity.
Bengaluru-based Ideaspring Capital is an early investor in Worxogo whose AI personal digital coach Mia helps sales teams. Now Mia has a new “remote working behaviour module" that aims to “keep remote teams engaged, motivated and productive."
“We need nudges from digital assistants while working from home," says Naganand Doraswamy, founder, Ideaspring Capital. “We have a number of startups whose products are well-positioned for the change we’re seeing. They can help their customers adjust to the new realm."
One of these is Bengaluru’s Lavelle Networks, whose software-defined wide area network is used by some of the largest banks in India. It’s a virtualized network overlay that connects multiple locations as well as the cloud. With more people working from home, the stability of networks has become even more important.
It’s not all work at home. Play is also important. This is clear from how much gaming and entertainment companies have been buoyed in the past few months.
That explains why Vertex Ventures led a $5.5 million series A round of investment in Mumbai-based vernacular podcasting platform Kuku FM in February this year. VCs apparently have more than six thinking hats.
Sumit Chakraberty is a Consulting Editor with Mint. Write to him at firstname.lastname@example.org