Key Insights on Startup Growth in Uncertain Times Webinar
Recently, Sigma Software introduced a series of free webinars to guide businesses on how to continue to move forward during this global pandemic. Our webinars bring together industry leaders from all over the world to provide expert views on how to stay successful while managing the effects of the current crisis.
Our first webinar, Startup Growth in Uncertain Times, took place on Thursday, April 30th. We welcomed two experienced entrepreneurs from the UK and Israel. One of them was Jon Mundy, a co-founder of Kiln, which is a company that builds businesses focused on emerging technology. Kiln works with startups and early-stage companies to help develop a product, devise commercial strategies, and raise investment. The other speaker was Benny Keinan, the VP of R&D at Venn and Ex-VP of Engineering Video at Oath (Verizon Media). Venn is a new way of neighboring that balances city life with more space for community, personal growth and social involvement. This wholebeing platform provides housing services, shared spaces, workshops and communal activities all connected by a neighborhood app.
The webinar host Veronica Korzh, General Manager of Sigma Software Labs, asked our expert guests a series of questions about how their startups were navigating the current business climate. They shared their unique experience of getting through all the uncertainties and talked about the supporting measures taken in their countries.
Veronica: Benny, last year your company raised about $40 million in Series A. Can you share some of your reflections on the situation right now and any messages from your investors on how to manage that money?
Benny: When we thought about the best approach it became a debate about short-term vs. long-term and what we know for certain, and what we don’t really know. At the beginning of this pandemic we didn’t think the virus would spread past China, until it did, impacting all markets around the globe. We started the year focusing on growth and to get into as many markets as we could while increasing our community size which required a lot of capital.
What we were initially doing was renting or buying apartments and leasing them out. However since the crisis started, people were no longer looking for apartments. At the same time people who already lived in them and who lost their jobs, were not able to pay rent and had to leave. We knew that if we continued to focus on growth, it wouldn’t end well for us. We stopped for a few weeks to figure out what we could do.
We decided early on, which was also recommended by our investors, that we had to think about how we could keep the money for at least two years and not plan to spend everything in a single year. This was because we didn’t know how long the crisis and its impacts were going to last. We completely changed our plans and budget to last for two years and took our focus away from growth towards building a better product for the retention of our members as opposed to the acquisition of new members. We also had to cut some of our costs, like letting some of our colleagues go who weren’t being utilized. So it started from: hold on, think about what you’re trying to do. Think about the climate and understand what you can do and how you can utilize time, energy, and resources so you can look back and know that you used this time valuably.
Veronica: Jon, can you let us know any trends or messages regarding funding in the UK?
Jon: Every business that has raised funds has had to re-evaluate what their business is going to look like over the next two years. Their customers and staff are in a different place and the challenges they have in terms of driving revenue are different. In terms of investors, we have had clients who have successfully raised money within the last couple of weeks and there is still money being invested. The first two or three weeks everyone took a break and a step back, but now people are coming back and they are more cautious. We had to work out what the new normal is. Investors still have funds and are still looking to invest; this just changes their priorities and focus. Also, business models have to adapt. There is an understanding that money has to last a little bit longer and be able to run a bit further: where it might have been a year or so before, now it is 18-24 months.
Veronica: How are your governments supporting businesses? Where is the money going?
Benny: There are many questions and uncertainties around government help in Israel right now. Companies have managed to get some kind of help, but not much. Everything is being split between big companies and small, and the big companies are getting more. But this is still something that is being developed.
Jon: The UK government has been proactive. When the crisis first hit, packages covered the bigger companies, and in the last few weeks they have helped smaller businesses and startups. Over a week ago the government announced a package of more than 1.25 billion pounds for firms driving innovation, high-growth companies impacted by the crisis, and R&D programs. However, how quickly the money gets into bank accounts is still unknown.
In the UK, people have had to cut costs, but there has been support from the government to furlough employees. The government pays about 80% of salaries up to 2500 pounds each month, in situations where the companies want these employees back. In huge businesses like airlines and hotel groups there are much larger layoffs. The UK government now supports companies to keep their staff as long as they can, but how long that lasts depends on how long the crisis lasts.
Veronica: What kind of cost-saving programs do you implement in your company?
Benny: Most companies see layoffs as the easiest way to produce results quickly, but you cannot evolve your business without people. You only layoff people who cannot provide value at that time. Israel has a government program which provides some sort of compensation for those not on a payroll. It`s about 70-80% of the workers salary. Every person who could go on that program was put on it. We have no traveling plans until the end of the year and this has definitely saved money. What we also do in order to cut costs is to use CAPEX vs. OPEX, coming to an understanding of different structures of expenses and what things we can postpone. Moreover, we took a close look at changing our business model to reduce liabilities. As an example we wouldn’t do construction work on a building right now. Also, we try not to use capital we have on hand, but do things in a way that utilizes debt instead. We’re also migrating some of the positions we actually need by considering the possibility of outsourcing them. We also ask ourselves if something can be put on hold for now or do we need to continue to do it? We must scrutinize every single dollar, why we expense it, and the value we can get from it.
Veronica: What kind of additional services would startups like to get from IT companies?
Benny: Outsourcing is not something we’re doing to cope with the short-term crisis. It is something to be done if the situation is long-term and there is no change. Something that can be suggested for small projects that are isolated from the main product, where people can be added quickly with little time wasted on integrating different teams and making significant changes to work. These are micro-projects or turnkey projects in which the company can clearly understand the cost and the end result. Understanding this can be really hard for a startup. Sometimes companies get into a project in which they’re paying for time and don’t know how to estimate the actual time needed. A much better approach is to more accurately understand and know the value and its cost. This is a good way for a startup company to utilize their money while knowing exactly what they’re going to get.
Veronica: Jon, what are some common mistakes startup companies are making right now?
Jon: The most common mistake is to be only focused on what you want to get out of your business and forgetting about people you are dealing with. Whether it`s your employees, customers, or investors, a new age has come. The age when we all having meetings on Zoom and talking to each other in our homes with our families around. One of the nicest consequences of this will be that we see people living their lives, while before we used to perceive everyone in their professional context only. These changes really affect how you deal with people, so we should take it into consideration and learn how to communicate and how to interact in a new way.
The other nice thing about this situation is that it opens people up. The conversations we have with customers and investors are more human and we’re more able to relate to each other. This means we will probably be better able to do business. The biggest mistake is not to take note of this change and adapt to it.
Veronica: How should startups find opportunities to scale up business right now?
Benny: There are always opportunities where there are challenges. We see startups are taking remote work and building products on top of that; we see med companies providing all kinds of solutions around that. Things that were not realistic or that were not needed before, today are becoming a reality. Look at the example from our business: people are still moving to apartments but not generally going to view them as much, so we provide virtual tools. We are taking a situation from a challenge to an opportunity. This is found in small features, in the way you work, in big products, and in the way you think about what you’re trying to build. Behind every single challenge that you face and try to cope with, there is a different way of thinking that results in innovative ideas and amazing products you create out of them.
Veronica: Are there any different or new trends in startups?
Jon: It is a little early to say in terms of starting a business, but there are new areas where there are clear opportunities. Businesses that are able to connect people and build on communities are going to be thriving now. We are going to enter an age of increased remote working and of different ways to connect people. There are a huge amount of opportunities in the gaming sector since it engages people and brings them together. Products that connect people to each other, or to brands, products or services they love, will also receive a boost.
Veronica: Benny, what do you do with your team to cheer them up and motivate them?
Benny: We have two 15-minute sessions during the day to meet and talk about anything besides work. This helps to create some type of social activity that is missing today. Another thing is addressing uncertainty and creating a 100% transparency policy for anyone with questions or anxiety. It actually helps people to worry less and thus focus on their work and to stay innovative and engaged. Also, we try to create projects outside the context of work in order to provide other opportunities for people to feel good. For example, having a board game night or taking part in a Hackathon.
Veronica: Are you tracking employee efficiency?
Benny: It really depends on the section of the company. Venn has an R&D team, which is quite used to working with remote tools. At the same time the operations side needs to be boots on the ground and can’t really use Zoom; it is strange for them. In these new conditions, the R&D team has actually increased its efficiency and used this time to tune the processes and make things more formal and collaborative. We’re working much better now with Slack vs. emails. One big thing we are missing is a whiteboard; we’re now using cameras to point to a piece of paper or different tools to replace it.
Veronica: Jon, have you implemented any new operational processes?
Jon: There are no more face-to-face conversations, we’re using Zoom. We were already working remotely and are used to that process. The way you network and find the new business has changed in a way for the better. This is because now events are being run for free as virtual events, and opportunities to have conversations are popping up. The social element has changed a lot, but it’s evolving: now there are virtual social events. Approaching people is more straightforward and people are more open.
Veronica: Jon, have you added any new services?
Jon: We have been having conversations about things we may not have considered before. For example, startups are more open to use remote teams to build products or MBPs, instead of hiring and building their own teams to do this. On the business strategy side, people are asking for advice more and looking for external advice. They feel they are in unchartered waters, which is opening up doors.
Veronica: Benny, do you have any inspirational and final words to share with us?
Benny: The most important thing to remember today is transparency with the people that you work with. In leading positions, you can’t take everything on yourself and can’t shield things from the people working with you. They are looking for answers, looking at how you behave and what you’re saying. Being as open as possible and honest as possible, this is the key to keeping the team together through this crisis.
We hope that the insights that our speakers shared will help you navigate your startup safely through the reefs and adapt to the new reality. We will keep bringing you outstanding experts that are transforming businesses in various domains. Follow us on LinkedIn, Facebook, and Twitter to stay updated about our news and events.
Watch Out for Upcoming Webinars:
May 28: Digital Transformation for the Banks: Trends and Challenges
Banks and financial institutions have been among the first to switch to digital channels in order to expand the reach and engage new customers in a more efficient way while reducing costs and improving overall performance and services. However, rapid technology development and increasing customer demands require constant updating and keeping up with trends. As Gartner estimates, up to 80% of traditional banks will go out of business by 2030. What do they need to prepare for in 2020 and the upcoming years? What steps should they make today to stay in the game?
June (date to be announced): Cybersecurity in the World Switched Online
Robert Mueller, once said: “There are only two types of companies: those that have been hacked, and those that will be.” These words are especially relevant now that many businesses are going online. Organizations face an ever-increasing number of cyber threats. According to recent statistics, hacking attacks are more advanced and occur every 39 seconds, which is more frequent than ever before. Yet, over two-thirds of businesses are not ready to respond to a cyber-attack despite growing investments in cybersecurity. A reasonable question for companies to ask is: what are the most efficient investments we can make to be protected from cyber-attacks?
There are more webinars to come by the end of 2020. Please note that dates and topics may change, and if so, these will be announced.