The devastating impact of the Corvid-19 on UK tech start-ups will be massive with boards urging us to make cutbacks and investors not taking risks, particularly High Net Worth Individuals (HNWI).
The bad news is these early stage businesses have seen a very quick reaction from the market and severe decline of investor interest. Some have even had previously agreed term sheets pulled and seen investment deals collapse.
However, I am not taking this approach, as to survive we must continue. I believe if we hibernate, we will wake up too slowly and our competitors will overtake us, warms Leanne Bonner-Cooke MBE of Evolve-IT Consulting Ltd.
So, here’s what am I doing:
- If we cut our staff, we will struggle to bounce back when the recovery comes, as we have a complex product, and a great team that we have paid a lot of money to recruit and train. The government have put plans in place to help businesses through the job retention scheme, which will cover 80% of salaries to a max of £2500 pcm. We will use that as a last resort, instead thinking about alternatives, short time working and reductions in salary over a few months.
- I see this as a pause in many businesses, but I also don’t believe we will go back to the same place afterwards. Therefore, think about the path you will take during these tense times, to bring you out of the other side. Rather than your initial investment deal that you were about to close, would a more modest amount of cash get you through this period of uncertainly? Could you borrow the money rather than give away equity at this low point? This will give you a chance to prove you can bounce back. Create a new plan that shows this.
- The Covid Business Loan Interruption Scheme does not apply to loss-making businesses. This creates a huge gap, as many IT start-ups are lossmaking in the short-term as they invest in the technology to grow. So, another avenue closed. To overcome this, I will target those sectors of Pharmaceuticals and Consumer Goods that are not being impacted as severely and continue to work with those innovative sectors in Automotive and Construction that are being impacted. Why? Because times are going to change; this will be around for some time, so why not prepare, improve your processes, digitise where you can, enable remote working across multi-disciplined teams and remove single points of failure, it makes life much easier to continue processing, even when remote.
The UK is a global leader in tech with more than 1,300 UK start-ups who have raised seed rounds over the past two years and now need to raise more funding. What is the economy and the investors going to do to keep them alive? Without something in place, we are in real danger of losing a generation of companies. These are the businesses that we need to help the economy bounce back after the crisis.
People cut their marketing costs as one of the first things, but if people don’t know about you – they cannot buy from you; if your competitors keep marketing and you stop – you will fall behind; if you don’t work out a way of working differently in the future – you are more likely to fail.
Don’t panic, this is a time to reflect, keep your feet on the ground and find a new path forward.
Leanne Bonner-Cooke MBE
Founder and Chair of Evolve-IT Consulting Ltd
Founder and CEO of e-bate Limited