Innovation 24/06/2020
Recession Breeds Innovation – Why Post-COVID-19 Startups can be Optimistic
Working at distance during lockdown and the ensuing recession. Image credit: Aleks Marinkovic, Unsplash
Navigating out of recession through innovation
The many impacts of COVID-19 have forced millions of established businesses to seek government funding in order to furlough their staff and loans to keep afloat. Even after the worst of the pandemic is over, a huge proportion will still rely on government support. Meanwhile, banks have been criticised for acting slowly to issue coronavirus loans.
Even the leanest of businesses, while perhaps better prepared for financial hardship, have struggled. The impact has also been sector-specific, and not always negative. While industries like travel, advertising, retail and mobility have been hit hard, video conferencing, food deliveries, e-commerce, gaming, streaming, health and (most) software-as-a-service (SaaS) businesses are all outperforming the market.
But what does the potential recession landscape mean for startups who only recently launched, pre-COVID-19?
I know that many will struggle to get a fair hearing from banks and the gatekeepers of other traditional funding sources. I’m biased, sure, but I really think that the use of crowdfunding will increase as a result of this funding logjam.
Throughout the pandemic, we’ve seen communities spring into action, using crowdfunding to fund vital services like personal protective equipment (PPE) production and food banks. We’ve also seen swathes of campaigns launch with the aim of helping local enterprises weather the storm.
Sources of funding and help during recessions
Crowdfunding has helped to stop countless businesses facing bankruptcy and forced closure from going under, with endless inspiring stories of local enterprises kept alive due to enthusiastic support from their customers.
Post-COVID-19, I believe that startups will increasingly look to the crowd to make their innovative business ideas a reality rather than hoping for traditional means of investment. If the crowd is sold on an idea, they will open their wallet to make it a reality and offer support when times are tough.
Early customers who back companies in their crowdfunding rounds, and invest in them via equity crowdfunding, stick with them for the long haul and are their most loyal and vocal supporters. For brands of all sizes, now really is the time to create truly meaningful relationships with their customers.
Positive attitude for startups and businesses in the post-COVID-19 recession world
In the new, post-COVID-19 world, genuine affection from customers who truly believe in a business will be more valuable than swathes of fleeting, distant relationships based on quick transactions.
As we navigate our way through the resulting recession, you might think that now would be the worst time to start a business. However, you only need to look at the businesses that were born out of previous periods of economic hardship.
Tech behemoths Apple and Microsoft were both launched during the 1970’s recession and have continued to innovate, becoming two of the biggest companies in the world.
