5 min read
Opinions expressed by Entrepreneur contributors are their own.
The idea that life will simply go back to the way it was once the global health crisis subsides is unrealistic. It’s not as if this is the last time we’ll face such a crisis as a global society. A host of businesses will have to fundamentally rethink how they operate in our current world and that’s going to require innovation-based solutions.
Young startups and entrepreneurs, precisely the ones best positioned to deliver this innovation, are getting squeezed. Traditional sources of funding, including capital from investors, have tightened up or been put on hold.
Many of these companies were cut off from benefits like the Paycheck Protection Program, or SBA Economic Injury Disaster Loans because as small, pre-revenue companies, they often don’t have employees, per se — just a motivated founder and core team who believe in the technology with a smattering of 1099 contractors or consultants
These companies are a brain trust that thinks about real-world problems and then solve for them. We need to tap into their imagination and support them in developing new technologies or adapting existing ones.
If there’s anyone who can help reinvent economies, it’s that the startups and entrepreneurs who thrive on being innovative and solution-based. These challenging times promote creativity. Having an urgent problem staring you in the face helps break down competitive barriers and encourages a greater degree of cooperation and collaboration than might exist in “normal” times.
The question, then, is what do the various members of the entrepreneurial ecosystem need to do to ensure that this creativity is nurtured and that innovation isn’t snuffed out right when we need it most?
Bet on creative solutions
The natural tendency in the investor community, whether angel investors or venture capitalists, is to pull back on new fund commitments when the economy gets shaky. Conventional wisdom says that cash is king in times like these.
But there’s nothing conventional about the current economic downturn. This is no time for investors to be sitting on the sidelines. That said, they should be leaning in even more to investment opportunities because we need the innovation that those young companies and entrepreneurs have to offer. The good news is that from all accounts global VC investors are sitting on bundles of cash waiting to invest.
Support entrepreneurs with all you have
There’s no question that for the U.S. to remain economically competitive with Europe and Asia coming out of the crisis, we have to do more on the policy front for our innovators. The UK launched a 1.6 billion euro rescue package for tech startups, including loans and grants for research and development. France and Germany launched similar programs worth 4 billion and 2 billion euros, respectively. Our competitive position is at risk if the U.S. does not have a comprehensive plan to follow suit, and quickly.
Meanwhile, state policymakers and government entities need to make sure they’re pulling all the different levers at their disposal. This includes surveying the entrepreneur community to get a real-time read on their primary concerns and ramping up educational outreach to inform them about the resources that are available to them.
This education should be delivered via online webinars and other content streams that are easily accessible while we’re all staying safe and practicing social distancing. Mentor networks should continue helping young companies connect the dots and navigate these tough times via regular videoconferencing calls.
Similarly, policymakers and business development agencies should ensure that pitch competitions and demo days can be transitioned to some kind of virtual offering to keep the momentum going and facilitate matches between ideas and capital.
Run a tighter ship
Entrepreneurs, meanwhile, need to hunker down and keep their house tight. Make no mistake: Proper cash flow management is paramount. Investors will be looking at a company’s management team — even if it’s just one person — to see how well they’re managing this crisis, how resourceful they’re being, and if they’re able to sustain their operations while still pushing the development of their technology forward.
Those companies who have their act together and demonstrate that they have a plan for growth are far more likely to attract capital. I am hopeful there will be capital available for good ideas and great teams.
After all, angels and venture capitalists are inclined to put their cash to work. But, they’ll want to be smart and pick the strongest candidates.
The vast challenges that we’re facing with this pandemic are precisely the time to be supporting entrepreneurs and startups, to help spur the next economy.
Those investors, nations, states and regions that understand the importance of innovators in moving past this crisis, and support them accordingly, will be best positioned for tomorrow’s economic growth.
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