This is the first in a series of articles from the Blume team covering different aspects of business resilience and survival — where some of India’s strongest business leaders share their insights / tips on how to adapt and respond to business disruptions, safeguard people and assets, maintain continuous business operations, and look for the proverbial silver lining.
In Part 1 of this series, Sameer Nigam (Founder & CEO, PhonePe), shared his experience of maneuvering previous downturns, and the key things founders must do to emerge stronger on the other side. Overall, the message was one of optimism – we should be grateful for what we have and focus on what we can control. Founders who focus on the silver linings and fight the hardest will be the ones who win once the dust settles. We, at Blume, could not agree more!
A truly insightful and fascinating discussion, this. Key highlights and takeaways from the session below.
Which sectors will experience tailwinds due to this crisis?
Anything purely digital should see strong tailwinds. This crisis has accelerated behaviour change towards digital. And entrepreneurs in these sectors should do everything they can to make the most of this opportunity. In particular, sectors such as edtech, online pharmacies, OTT streaming, gaming, anything with a paid subscription model, data analytics, and productivity tools should see a strong uptick in customer adoption.
Sectors that depend solely on advertising revenue, particularly adtech, will be massively hit.
How should digital start-ups in tailwind sectors (e.g. gaming) balance growth and profitability, particularly, given declining ad revenues?
Entrepreneurs should decouple operating and financial metrics, and be completely transparent with their investors and teams about each. This is the right time to grow operational metrics, given accelerated customer adoption and opportunity to capture mindshare. That said, post the WeWork era, the world has moved towards focusing on profitability with most established startups aiming to be at least contribution margin positive (by the end of 2020). This might be the right opportunity to make some hard calls on monetization and introduce different revenue models (e.g. subscription or freemium models vs advertising). Entrepreneurs might be pleasantly surprised to find that customers are more willing to pay for things they truly value during these times.
Tips on product prioritization.
Downturns are a brilliant opportunity to focus on product enhancement and implementing innovative product strategies to break away from the pack. As an example, this may be the best time to market digitally given rock bottom advertising prices.
This is the time to think out of the box to get organic customer adoption for your product / service. Build features that people need more than ever or associate yourself with causes that people can get behind to build brand love. And most importantly, this is the perfect time to forge unnatural and non-obvious alliances with other players, which will benefit your consumers and lead to new opportunities down the road. This is already happening across sectors as people are looking to help each other wherever possible.
Break your product, tech and marketing teams up into two units – normal business and growth hacks / new features. Allow the first set to focus on the status quo and making sure things are stable. Allow the second set to focus on 3-4 new areas of focus. Put down the 12-month product roadmap. And execute aggressively. Internal communication tools (WhatsApp, Slack) are extremely helpful in managing workflow.
Tips on navigating investor communication over the next 3-12 months.
Be brutally transparent with your internal investors. Remember that your interests are aligned. Further, be respectful of their money and demonstrate that you are thinking hard about how best to extend runway and trim non-core expenses. The most important thing is to align with your investors on the plan over the next 3-12 months. Do you prioritize growth or profitability? Do you chase operating or financial metrics? These are strategic calls that need to be made with the consideration and buy-in of your investors.
Tips on cost optimization.
Take a hard look at your cash flows and identify your top 10 cost centres. Make individual teams responsible for each cost centre, set targets to rationalize / trim each, and hold teams accountable every month. Focus on increasing the runway for at least 12-18 months.
Tips on rationalizing employee costs and maintaining morale.
Key message is to protect your employees; they will thank you in spades later! Do everything you can to protect junior employees since these are very hard times. Founders and senior management should be the first ones to take a pay cut and redirect other expenses (Marketing, R&D etc.) towards salaries if needed. If founders absolutely need to let employees go, they should identify the bottom performers, communicate with them transparently and empathetically, and try to keep them on for at least a month or so till the worst of the crisis subsides.
On employee morale – crises like this are actually a great time for teams to rally and come closer together. As a founder, your role is to be a sponge for all the stress your startup is facing and make sure your employees are busier than ever. Demand more from them during these times and hold them accountable. Give them a chance to perform better and they will surprise you!
Views on fin-tech, MSME commerce — post COVID
Overall, there is certainly extreme stress in the system, with payments and merchant transactions down significantly. The issue is further compounded by supply chain disruptions across the country.
That said, there are several silver linings which bode very well for the sector. The first is that this crisis has demonstrated to the Govt. of India just how vital e-commerce (and the associated supply / deliver chains) is in India and the critical role e-commerce can play in connecting users to businesses. This should result in favourable regulations for online grocers, pharmacies, and other critical marketplaces.
The importance of small MSMEs, kirana stores has also become more increasingly apparent – 95% of commerce still happens offline. As these MSMEs return to normal business post COVID-19, they will be looking for new and easy-to-use solutions to help them digitize their operations. Similarly, while the number of digital transactions are declining, the number of active users being added to the system is still increasing every day, implying a massive opportunity for payments and MSME focused retail-tech companies.
PhonePe has opened its ‘PhonePe for Business’ B2B app, and is partnering with such MSME focused startups to allow these startups to reach more customers and provide massive value to MSMEs.
Lending will be critical during and immediately post this crisis; we will need to provide unprecedented liquidity to MSMEs in order to rebuild the economy. However, we are not seeing innovation or aggression on this front just yet. Overall, this is a huge opportunity for startups to build great products.