How are startups dealing with the Covid-19 pandemic

Dear Friends ,

We are all facing unprecedented times. Never in our lifetime have we had an instance where the government had effectively closed down major parts of the economy so quickly and suddenly for the purpose of maintaining the health of the population of the country. This is not just an India phenomenon but is happening all over the world as COVID-19 goes around the world with its deadly force. The implications for all of us, from both a personal and business perspective, have resulted in significant changes to our day-to-day lives. Schools are closed, Corporate India is all working from home, travel has been brought down to a standstill, offline retail is shut down except for essential groceries and medical stores, and we have to put together resources across the country to ensure our healthcare system is able to fight the onslaught of COVID-19. While we did not predict this unfortunate event, we do believe we are well positioned to survive and thrive in this environment.

Through our investment strategy of focusing on attractive, bottom line oriented, durable diversified businesses, conservative entry valuations, effective use of leverage, combined with our operational philosophy of close engagement with our management teams and our mentors and advisors, and our experience managing in stressed situations, we will not only be able to manage our way through this crisis but also position ourselves to take advantage of opportunities to continue to grow our businesses successfully once we get to the other side of this downturn.

At IvyCap, in response to COVID-19, we have taken appropriate actions to maintain the health and safety of our employees. Since March 16, our offices have been closed and all of our employees have been working remotely. We have previously put in place appropriate technology that has enabled us to work effectively and efficiently from home and have continued our normal cadence of internal meetings. We have also eliminated all travel. So far, we have had no instance of anyone at the firm or in our founding teams, contracting the virus or even having a health issue that would warrant getting a test.

Like in every crisis, those companies and businesses which survive the crisis tend to come out stronger. Towards this end, IvyCap is working closely with its portfolio companies and external environment to make sure our companies recover from this crisis heathy and are better positioned. While this may not be the case for all our companies, our engagement with portfolio founders has been very encouraging and most of them are deeply committed to steering their businesses and organizations to success. They are demonstrating resilience, agility, entrepreneurship and leadership in charting a business and financial path to recovery. I wish all you are taking adequate precautions during these times. I wish you safe and healthy lives and hope that we all will be back to our daily normal lives sooner than later.

We asked startup founders “How are they dealing with the Covid-19 pandemic?” And this is what they had to say!

Vishal Jindal, Co-founder & Director

1. Dine-ins and delivery businesses have been impacted majorly due to COVID-19, do you believe you are in an opportunistic space with a cloud model?

Sure. For big brands in the food delivery space, there should be a silver lining in the current crisis. As people might not go back to dine-in & clubs for a long time. And according to food aggregators, around 30% of smaller dine-in & delivery outlets might not survive this crisis. People should shift majorly to food delivery from big brands which they can trust for safety & hygiene.

2. How is the company coping with the current low demand phase during complete lockdown?

BBK outlets wherever state govts are allowing us to be open are doing quite well in the current crisis too. Some state govts are not allowing Food delivery outlets to be open despite the Central govt putting Food delivery under essential services. This situation should become much better in the next few weeks. We believe BBK should be in a very good position to take care of this opportunity.

3. What are the food safety measures the company plans to undertake during and after the current epidemic?

BBK is extra serious about safety & hygiene in current crisis. We are screening all employees for right body temperature very day. Kitchens are sanitized every hour and delivery bags after every order. All kitchen employees are wearing masks & gloves at all times. At BBK we make fresh Dum Biryani for every individual order, and deliver in same handi in which it is Dum cooked. Only the customer opnes the Biryani Handi seal ensuring further freshness & hygiene. All Delivery bags to customers also have tamper proof seal. BBK website we have created “Safety” tab which all customers can view for extra steps we are undertaking currently. There is also a safety video whose link we send to all customers on sms after their order is dispatched.

4. What are the cost control measures taken by the company to have a sufficient runway and to tide over the current scenario?

BBK has negotiated all outlets rentals for next 3 months greatly. Corporate salaries have been voluntarily reduced by around 30%. Some employees who might not have enough work in current scenarios like expansion have taken sabbatical for this period. Input costs for certain raw materials have been reduced. Marketing & promotion expenses have been substantially reduced. We have worked out scenarios in which under much reduced sales during lockdown, the losses should be quite less.

5. Given the uncertainty, does the company focus more on profitability rather than expansion/new store openings?

Till the situation normalizes, BBK plans to focus more on profitability. And growth henceforth. How are you preparing yourself to ensure minimum damage and faster recovery? By keeping costs low & organization lean & agile. And yet preparing for fast recovery & growth which should come soon in case of Food delivery. In US Dominos Delivery has seen surge even in current crisis.

6. Do you think your previous PR efforts in new geographies can continue to imbibe customer minds post the epidemic or you may be required to start afresh? s

Customers are noticing how BBK has reacted proactively on safety, hygiene & great communication during this crisis. BBK need to do PR & marketing should be less after this crisis as we should be able to enhance our Brand image through our proactive steps during this crisis. BBK has been also giving out lots of daily complimentary meals to need in different cities during this crisis.

7. What is your perspective on the big picture of what's going to happen next?

India should hopefully be able to come out of this crisis much sooner & stronger than most other countries due to timely steps taken by Indian govt. Given the low interest rate scenario and companies looking to hedge their bets beyond China, India should see rush of investments after this crisis.

8. What scenarios do you see playing out at the macro level? How will these scenarios impact your industry?

9. How is the availability and morale of manpower going to be impacted in this scenario. What specific measures you are taking to ensure that your employees are motivated and delivering as they work from home?

BBK has ensured that most outlet staff get lodging & food during this crisis. Also we have kept communication & employee morale quite high through regular virtual town hall meetings for all employees & empowering them further.

10. What specific suggestions would you have for the government to ensure the impact on your industry is at the minimal level?

We would recommend waiving GST for next 3 months. And Food delivery being essential services, govt should ensure cooperation of local govts at ground level with Food delivery companies.

Pankaj Vermani, Founder & CEO Clovia Lingerie

1. What is the impact of COVID-19 on your business and how are you dealing with it?

We are an Omni Channel brand selling through both online and offline channels, but since we do not fall under groceries/medicines, our operations were temporarily suspended. However, thanks to our robust supply chain, our team pivoted to direct our resources to assist public and private bodies with making high quality and controlled cost PPE kits and masks for medical professionals. This is our way of contributing to the cause of this pandemic while ensuring our supply chain is kept running during this disruption time.

2. Do you see business adapt quickly in terms of differential product offering, target segments, engagement metrics, etc.?

Absolutely. This is not a matter of choice but the need of the hour. Agility will define who will sail through these times. We're viewing the business matrices basis 3 phases - immediate term view i.e. during lockdown, when engagement is the key, mid term view, the days post opening and the longer term view, when every business will adapt to the post-covid world. Every phase will have different matrices and actionables.

3. Do you think you can focus on profitability going forward?

For us nothing changes. We've never been a loss-making business, so that's one martix that stays constant for us. Ofcourse the push will only get harder in cash-flow positivity direction now.

4. How will customer acquisition (online/offline), retention and engagement change post COVID-19?

This is a seismic event, and the shifts in consumer behavior will be no less. We see all data points and learnings from past events (similar though more regional) pointing towards a spike in online sales and more affinity towards trusted brands. You have to handhold your existing/new/potential customers through this time. Customer engagement will be the key and all communication will need to be passed through the Covid filter. We see a lot more first time buyers from smaller towns getting further triggered post the pandemic. There will need to be specific strategies to align to the same.

5. Given the uncertainty, does the company focus more on profitability rather than expansion/new store openings?

6. Would brand and performance marketing strategies change over time?

Yes. Both will. Brands will focus on value and trust-building. Marketing will see a lot more offer driven communications atleast for the next 3-4 quarters till the piled up inventories clear and cash flows streamline

7. Would offline/ print be back in vogue?

In a country like India where offline retail is 97% of the spend, it's not disappearing overnight. But yes. recovery will be long and tedious. The days of expensive real-estate and crazy rentals are gone for quite some time to come. Brands will have to be a lot more sensitive to their store-level unit economics, per-sqft sales and rent-to-revenue ratios going forward.

8. As a first digital brand in essential clothing, do you see a faster road to recovery?

We believe the current unfortunate events will trigger a surge towards online adoption. We're hearing stories of so many first time online buyers who got online out of need or fear of contact and this will continue to happen. While the offline retail comes with fixed costs which continue to burn a hole in your bottom line while recovery happens, online is a lot more linear and agile. We find ourselves in a sweet spot of online, essential category which has a direct connect to the consumer. The opportunity for us to communicate the trust to our customers and onboard them is a lot bigger than the offline-first traditional brands.

9. What is your perspective on the big picture of what's going to happen next?

As I said its a 3 phase strategy one has to look at - immediate/now, immediately post lockdown and the longer term view. This is a life event we are going through, no less than a world war-ish event. The indian companies that weathered the dotcom burst are key listed players of our eco-system. Thats the way we have to look at it as entrepreneurs. The ones who are lean, low burning, fast adapting will survive the tide and then they have to make sure they stay relevant and adapt, evolve everyday basis the learnings from consumer's behaviour. If there was ever a time to prove that for you the customer is the king (queen in our case), it is now.

10. What scenarios do you see playing out at the macro level? How will these scenarios impact your industry?

We see a lot of customers now moving to online for buying. We believe the movement towards brands from unorganized will be far more accelerated, considering the fact that people are a lot more concerned about hygiene and the source of products since its directly impacting their health.

11. How is the availability and morale of manpower going to p7be impacted in this scenario. What specific measures you are taking to ensure that your employees are motivated and delivering as they work from home?

The corporate teams are far more aligned than before considering their distractions of daily operations are gone and focus on future developments are higher. However, the manpower on ground - warehouse, factories is witnessing movement back to native towns. The supply chain will take substantial time to recover the shortages created now. From a morale perspective, The biggest challenge every employee has to go through this time is uncertainty. We have a very simple thumb-rule. If everyone is treated like a partner, not an employee, things eventually work out. And the most important thing between partners is transparency. We are communicating all developments with the teams every step of the way even though some bits might sound redundant/irrelevant to them now. What this does is keep them always aligned to how the core team is thinking and how the company is progressing.

12. What specific suggestions would you have for the government to ensure the impact on your industry is at the minimal level?

Government needs to take serious measures to support SMEs. SMEs are the backbone of our economy. While govt measures are trickling in, the ones that have come out so far focus on only a certain set of very small organizations. Majority of small businesses use working capital loans as lifeline and no small business ever keeps cashflows sufficient to survive an unprecedented time like these. So some serious measures with regards to survival of these organizations will need to be taken. Also safeguarding jobs should be the prime criterion for the government, but mandates/instructions alone will not suffice. More steps at policy level will need to be taken to support organizations for that. If people have (jobs and) salaries to buy stuff, the economy will bounce back quickly.

Amit Backliwal, CEO at Pharmarack

1. How has COVID-19 impacted the pharma supply chain? Do you think it is an opportunity to grow your business?

The supply chain in pharma has been negatively affected with disruptions around supply side more than the demand. Most of the manufacturers and distributors are struggling to ensure products reach the last mile (retail pharmacies) on time and get visibility of where the demand is coming from.
Yes, for our fulfilment enablement business, it is a strong positive. Additionally, to digitise and automate the ordering process, we are in a strong place

2. How does Pharmarack contribute to supplying essential medicines to retail pharmacies during the covid-19 epidemic?

We have a large platform with over 4000+ distributors and 60,000+ pharmacies with clear visibility on stock levels and supply/demand. we are able to match the parties enabling availability of products as best as possible.

3. Is Pharmarack helping the government track essential medicine usage? if yes, how?

Yes, we are already working with Govt of Maharashtra and Gujarat in providing them daily stock data of essential medicines for Covid-19

4. Is there a shortage of any essential medicines in the market which may impact the supply chain directly?

Yes, there is a shortage in a few categories due to media news, social media messages. Outside of the hype, there is a genuine increase in the consumption of vitamins, masks, sanitizers, etc

5. How are you dealing with a changed business environment?

6. Do you think your previous PR efforts in new geographies can continue to imbibe customer minds post the epidemic or you may be required to start afresh?

It is a big learning for all of us. On one hand, we are seeing increased productivity as travel time and non-productive time is saved, but on the other side not having physical meetings with our own team and clients is something that will get used to. Our clients are also going through the change and so there is a definite delay in decision making.

7. Are you taking steps for cost reduction? If yes, how?

Yes like most other companies, we are taking an aggressive stance on cutting back on current cost base by a slew of measures that include: reducing headcount wherever non-performers are there, re-looking at all processes and teams to see where we can optimise and where we can re-purpose. No increments, merits for this year. Additionally, negotiating with each vendor on discounts and payments over instalments

8. How difficult do you think is the recovery in your business sector?

Pharma and healthcare hasn’t been that badly affected unlike most sectors, so for us its around managing current challenges, driving change management internally and at clients to make quick decisions.

9. What is your perspective on the big picture of what's going to happen next ?

Use of technology will become mainstream, cash burn will become very critical, disaster and COVID like situations could arise again and so business continuity will become a key component of the strategy for everyone.

10. What scenarios do you see playing out at the macro level? How will these scenarios impact your industry?

Global travel, face to face meetings will become lesser and lesser, work from home will become a big cultural shift globally, increased focus on environment & nature will take center stage, businesses will have more focus on the non-human interface as a backup at least, cybersecurity, cloud computing, etc will become the big rage.

11. How is the availability and morale of manpower going to be impacted in this scenario. What specific measures you are taking to ensure that your employees are motivated and delivering as they work from home?

This is definitely a difficult one. Although most of our teams are busy, we do see this as a big challenge nonetheless. Although we are doing lot of conversations and calls, we need to do more and maybe get alternative mechanisms in employee engagement.

12. What specific suggestions would you have for the government to ensure the impact on your industry is at the minimal level?

As pharma and health are at the center of this situation, I hope govt has realized the importance of investments in healthcare as important than only 2-3% of GDP. Also, creating mechanisms to have access to large and connected data becomes a difference between a pandemic happening to a potential happening

Pratyush Halen, Founder & CEO at Fingpay

1. How has COVID-19 impacted your business transactions?

We have 2 channels of financial services, the one being as a banking correspondent which is termed as an essential service by the government. It's usage is continuous as customers need to withdraw cash and access other banking facilities. Our other channel being the digital EMI collection solution which has been deferred by 3 months due to a moratorium put by the government on the EMI collections. The business has not much affected just that it has been deferred for 3 months.

2. Are you facing any reduction in operational merchants due to the lockdown?

Yes, to be precise, in the start of the lockdown, we faced 70% reduction in our merchant transactions and as the days are passing by, we now have only 25% reduction in our active merchants.

3. With the proposed moratorium on EMIs in current COVID-19 situations, is there an impact on use of your cash management services for digital collections?

Yes, there is a complete impact with almost nil transactions. The good part is that the collection services are deferred and not waived off hence the volume overall will be the same for the year.

4. Have your solutions around digital onboarding or biometric authentication been impacted? Also, do you have plans to educate your merchants who may operate remotely about the non-touch guidelines?

Yes, as the new onboarding is deferred and no new loans are given to customers, the onboarding solution has a temporary impact.

5. How do you plan to do optimum utilization of your proceeds?

We are utilizing the proceeds for research and development of our new Neo Banking Product and also working on further digitization and automation of existing business.

6. Do you think recovery will be easy in the financial sector?

Yes, in the banking and financial services, the recovery will be easy as we are working in the essential services bandwagon.

7. What is your perspective on the big picture of what's going to happen next?

It's difficult to predict about the near future but I think that COVID19 shall have a long term effect on the overall economy. We are working on the digital banking solutions which shall remain relevant during COVID19 and post that. We wish speedy recovery of the people and the economy.

8. What scenarios do you see playing out at the macro level? How will these scenarios impact your industry?

The current situation is very unpredictable. At the grass root level, things seem to be normalizing as we are processing the usual amount of banking correspondent transactions today. As the bottom of the pyramid stabilizes, I believe that at the macro level, the things shall move back to normal in a few months. Our Banking industry does not seem impacted but the collections are largely impacted due to the moratorium. For our upcoming neo banking, we believe that this is the best time as it's usage will increase.

9. How is the availability and morale of manpower going to be impacted in this scenario. What specific measures you are taking to ensure that your employees are motivated and delivering as they work from home?

Our team members morale and availability has gone up. We are doing more work than ever. We also got time to take a pause and look back at where we have reached and what all needs to be accomplished. We are improving our business processes, technology development and automation, conceptualization of NeoBanking and it is keeping the team more busy than earlier. Me and Anuraag are having daily calls with every team member to track our progress.

10. What specific suggestions would you have for the government to ensure the impact on your industry is at the minimal level?

In my view, the government has been really proactive in taking balanced steps for the industry. They have taken initiative to promote digital payments in such situations which is commendable. I believe, government is doing the best efforts towards normalizing the situations for the overall industry and economy.

11. How is the availability and morale of manpower going to be impacted in this scenario. What specific measures you are taking to ensure that your employees are motivated and delivering as they work from home?