Survival of the fittest – COVID-19

Day 15 Lockdown. Kuala Lumpur, Malaysia – It has been 15 days since life as we knew it, had come to an almost complete standstill. Our freedom of movement and civil liberties had been totally upended, and we are now having to quickly come to grips with our new norm. 

Geographically, South-East Asia has been on rather high-alert for weeks, mainly due to our proximity and frequent travels to the Covid-19 epicentre, China. Most governments in the region however were quick to respond with sweeping measures to shut down schools, businesses, and borders to incoming travellers. The economy has ground to a shocking halt, however the move to curtail the virus has been the ultimate priority. The swiftness, assertiveness and clarity have drawn flak from the west, calling the measures ‘draconian’, only to see Europe and US follow-suit very quickly as their own countries started facing an uncontrollable epidemic. Ironically, this about-turn happened as their own ‘non-draconian’ tactics quickly spiralled out of control…and sadly continue to do so.

The example of a ‘lockdown’ applies to my world as an entrepreneur. Crisis calls for swift decision making, assertiveness and clarity in the eye of the unknown. Crisis separates the men from the boys, the true leaders from populists, and takes a gargantuan amount of vision, confidence and grit to see one through these unprecedented times. Politicians often say ‘Why let a good crisis go to waste’, however this is not a time for heroics, ego, or opportunity,..this is a time of life and death.

The reality however is Covid-19 will kill start-ups, small businesses and cripple larger organisations much faster than it kills people. The trifecta effect of the China-US trade-war, Oil crash, and Covid-19, is something even the largest and most successful organisations could and did not anticipate, let alone the smaller more vulnerable ventures with hardly any runaway nor cash reserves to begin with. The studies below illustrates the runway visibility and impact on businesses (particularly start-ups) will face in the next few weeks (or months, if you are fortunate).

Without sounding like the grim-reaper, I personally believe that 2020 will be a total and disastrous write-off for many of us. Let’s not fool ourselves and go on the ‘Plan for the worst, hope for the best’ analogy. Hope is not a strategy. 

As you read this article, we would have entered Quarter 2, 2020, with only the second half to wish for things to improve. Unfortunately, this will not happen. Assuming China gets on its feet faster than everyone else, Europe will most likely still be looking for the apex of the virus. The US will be uncontrollably out of control, and despite the trillions spent on stimulus and fiscal assistance, it will take time to get supply-chain moving again, sentiment to improve, and eventually demand to return throughout all industries. Unfortunately by this time, millions of people would have been laid-off, businesses closed, individuals bankrupted and inflation blown through the roof. A recession would be a base-case, and a depression more likely. We need to accept that 2020 is over and done with. We need to move on and plan accordingly towards 2021. We need to sit this one out.

Is there any hope? 

For start-ups who had been fortunate to raise funds prior to this crisis, you will need to cut the fat very quickly, conserve your cash, and ‘go-dark’ to weather this storm. It will be extremely painful and emotional, however the alternative of inaction will be worse. As for those currently seeking new emergency funds to survive, unfortunately you will face a natural death…unless you choose to go dark, and hibernate until this Covid-19 winter is over…Else, you too will inevitably be a casualty of this cursed year. VC’s, LP’s, and PE’s will also suffer. The funding eco-system will dry-up, until it’s next resurrection in 2021 at the very least. Bottom line, keep it real, don’t be delusional, and once again don’t try to be a hero.

For those who have accepted the stark reality of the ‘worst case scenario’ as above, you will need to focus on what you can control. Forget growth, forget pivoting, forget new strategies,…there is simply no time for experiments at this stage. Rather, focus on conserving cash until we see some light at the end of the tunnel. Focus on creating as much runway as possible, even if it means cutting to the bone. Focus on how you will get through this crisis with only the mission critical parts of your business. This will be your best chance of survival. 

Finally, stay healthy, stay safe, and good luck…you will undoubtedly need it. This is the Survival of the Fittest.