Each startup in Latin America is affected by the repercussions of Covid-19 in a unique way. The impact often depends on how the startup entered the crisis and the sector in which they operate.
At the onsite of the crisis, forward-looking startup investors were quick to present action plans and decision matrices that stressed cost-cutting, hiring freezes and doing everything possible to extend runway. The Sequoia Matrix and the Kaszek Survival Guide have been great resources founders in Latin America.
The precise measures to be taken are a bit more nuanced and there is no one-size fits all aproach.
Key questions startups have addressed:
- How much cash does the startup have going into the crisis?
- Are team members able to work remotely?
- Is the business model a strength or weakness at this time?
- How significantly affected is the sector the startup operate?
- Does the startup or its clients offer a basic necessity?
Diagnostic of potential Covid-19 impact:
Some startups entered the crisis with very little cash, while others have found themselves in a position to grow in unexpected ways from the current environment. Here are four general types:
Survive. Startups where cash burn is the main concern and the business model is temporarily shut down. The runway is less than three months, less than social distancing measures are expected to last.
Re-invent. Startups who sell digital products to clients that have been hit hard by the crisis. Rather than making significant cost cuts, these startups need to invest in new pivots in order to help customers stay in business.
Optimize. Startups entering crisis with solid cash position and some recurring clients. They can take traditional business measures to preserve cash, reduce sales efforts and get to the other side in as good as a position as possible. Perhaps it is the right time to focus on product improvements rather than growth.
Thrive. These startups will can grow on the tailwinds of social distancing practic. Edtech and e-commerce startups are some examples that have seen a quick uptick in sales recently.
Action plans for going foward:
Startup founders have taken some immediate actions. The coming months will bring new, longer term challenges. Here are some ideas action plans for each category in the strategy framework:
These categories are not static. Startups are always moving forward finding ways to grow and adapt. After a successful re-invent it could be time to thrive!