How does the coronavirus crisis impact early-stage startups?
Many small businesses, particularly those in the personal services, restaurant, hospitality, and travel industries, have been hit hard. The younger, more fragile firms in those industries will struggle to get back on track.
But what about even earlier-stage ventures? Many of the entrepreneurs we work with at the UNCW CIE are in the pre-revenue stages of business development. They do not have employees. They do not have customers. The founders are in the planning stages – researching, interviewing prospective customers, developing prototypes and software, and laying the groundwork to launch their businesses. And without payrolls or lost revenues, there’s not much help for them in the current CARES Act.
On the other hand, they’re accustomed to getting by on a shoestring and can use this time to hone a more viable launch strategy and take into account the, previously unimaginable, new reality of the coronavirus crisis. Something startup entrepreneurs in the past never contemplated.
NC IDEA Foundation includes the following question about risk on their application for entrepreneurs to apply for $10,000 MICRO and $50,000 SEED grants. RISK: Looking across all aspects of your startup - technology, adoption, marketing, sales – what is your riskiest assumption, what keeps you up at night, and what are you doing to mitigate that risk?
I’d be willing to bet not a single entrepreneur in the 14 years NC IDEA has been accepting grant applications has answered that question with: I stay awake at night worried that my business will be wiped out by a national shutdown in response to a pandemic. And yet, here we are.
Last week, I posed this question to the 63 students in my entrepreneurship class that are working on new venture concepts: Pretend you started your business a year ago. How would the coronavirus crisis be impacting your operations? Can you weather this crisis with your original business model?
One student turned it around and asked me: What would you do if you were creating a business while the virus was impacting the country? My answer: If I had a business that was in the pre-revenue stage, I’d be evaluating the business model and determining whether I needed to make changes to launch the business in this new climate. I’d use the 'shelter in place' time to watch what is happening in my industry, identify trends, finetune my business plan, and develop a strategy to launch once the current crisis had abated. I’d prepare my marketing strategy and messaging. I’d also get my investor materials ready – pitch deck, executive summary and business plan. I’d be madly filling out grant applications, applying for opportunities to present to investors, and joining competitions. I’d keep my foot on the gas pedal.
When we get through this crisis, the entrepreneurs that have spent time preparing will have an edge. They’ll have the benefit of 20/20 hindsight and know the importance of a business model that can survive a pandemic and economic downturn. They’ll be poised to take advantage of the emerging trends in education, biotech, healthcare, and technology that are coming out of it.
We’re seeing exactly those types of entrepreneurs in our region – they’re the ones forging ahead in the NC Bioneer Venture Challenge, participating in the current NC IDEA grant cycle, and preparing for the virtual CED Venture Summit in May. I also see those entrepreneurs in my class – almost every student was ready with ideas to position their startup to adapt to new conditions and trends.
The CIE is here to help entrepreneurs keep their ventures moving forward. Learn more at www.uncw.edu/cie.
Diane Durance, MPA, is director of UNC Wilmington's Center for Innovation and Entrepreneurship (CIE). The CIE is a resource for the start-up and early-stage business community to help diversify the local economy with innovative solutions. For more information, visit www.uncw.edu/cie
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