A study recently conducted at Harvard University among 1,000 institutions and venture capital funds, came to examine how decision-making and investment processes have been affected by the coronavirus pandemic. Providing the same set of questions both times, the authors of the study compared 2016 survey results to those received after the outbreak. One of the first conclusions of the study inferred that VCs have significantly reduced the volume of their investments, post-pandemic. Currently, they are at about 71% of a pre-pandemic economy. Yet, VCs expect to grow investment volume to 81% during the coming year, starting in September 2020.
A very interesting insight emerged from the study: 51% of start-ups experienced a positive impact from the pandemic, 38% of start-ups experienced a negative impact, and 10% of start-ups experienced a significantly negative impact.
At this point in time, strategic members of management enter the equation. They can, in many cases, produce pivotal business moves that will enable the affected company to minimize the effects of the pandemic.
If prior to the pandemic the success of the companies depended mainly on the traits of the Co-founders, now the importance of experienced Directors, who can navigate the company and take advantage of opportunities arising from the coronavirus pandemic is just as important. In these days of uncertainty, the company’s Board of Directors shall contain experienced VC members, who can provide recommendations and effective feedback regarding the strategic management of the company, that is – the decision-making process guiding the company. They shall network with investors and with the collaborative network of the VC.
In such a period, even start-up companies that have excellent team members need more than ever before, besides passive capital that will allow them to continue operating, managerial values and strategic planning, which can be achieved by nominating a strong and experienced Board of Directors. Such a Board of Directors should include former entrepreneurs that have the ability to evaluate the market much more broadly.
Take Bizzabo Inc, for example. The company provides a platform for event planning and is a good example of successful strategic planning. Until the coronavirus pandemic, the company platform aided to organize only physical conferences. Due to the pandemic, the company decided to reinvent itself and has begun to organize online conferences. This astounding pivot led the company, by the end of 2020, to a revenue growth of 100%. As well, in December 2020, the company raised a record $138 million in Series E funding compared to $27 million in the previous round of funding.
Airbnb is another good example of successful strategic planning. The pandemic affected Airbnb’s tourism business heavily, and the company suffered from numerous cancellations and slow bookings, which led to significant revenue loss. The company managed to get out of this dreadful situation, by recognizing the demand for local getaways. Many people started moving to more affordable housing in smaller towns because of the reality of working remotely and now prefer vacation homes over luxury hotels in the city, because of the option to easily implement social distancing requirements.
The company redesigned its application and website to focus on local getaways instead of big, touristy cities that were most popular pre-pandemic. The payoff, as the company reported in the third quarter of 2020, was revenue recovery.
Hence, the coronavirus crisis has proven that the companies that could adapt their strategy by focusing activities on products that have grown with the pandemic and the trends it brings are those that survive and thrive. These companies will be able to raise funds much more easily and sustain their cash flow. Another example of proper strategic management can be taken from companies that knew to raise funds when they were available even if there was no obvious necessity at the time. Post-pandemic, they found themselves with financial reserves from the previous round of fundraising.
Also, companies that were well funded prior to the coronavirus and haven’t been affected by it, have received requests from investors to participate in new rounds of investment. Meaning, they became even more attractive for investing in light of the crisis. In this way, these companies found themselves in a comfortable position in which they do not need urgent financing and can set conditions that are convenient both to them and to the investors.
Even companies that did not prepare for the coronavirus crisis properly, will be able to survive this crisis, as long as they quickly come to the conclusion that they must seek investors who can add value by making strategic management changes in the company to suit the Corona era. For companies that are at the forefront of the crisis with technologies in the tourism and aviation industry, it is going to be much more difficult to reinvent themselves. But, AirBnb and Bizzabo have shown how to implement strategic changes and have succeeded.
As the coronavirus crisis persists, it seems that the virus and its long-term effects are here to stay. It would be naive and dangerous to assume that the newly developed vaccines will simply eradicate the virus from the world in the next year. Companies would have to adjust their activities in one way or another to the coronavirus by making strategic management decisions, preferably as soon as possible.