What’s great about entrepreneurs is that despite how dark the world gets, Australian startup founders are still out on the frontier searching for opportunities to create value for the community.
The COVID-19 pandemic is teaching us a lot about where the world is fragile. Many of us feel isolated and scared, and that makes it easy to act selfishly. But the right decision is to be focussed on the needs of others. This crisis, as bad as it may get, is an opportunity to find the path that shows us we are better together.
While most of our attention is focused on the unfolding public health crisis, it’s important that we also pay attention to what’s happening with Australian startups right now.
Startups are companies that balance on a razor’s edge even when the economy is going well. In my conversations with entrepreneurs these past few weeks, I have seen the full spectrum of human emotions; some founders are manically positive in the hunt for opportunities, and others are in absolute terror as they try to keep their venture alive.
Some founders will find new opportunities to pursue, but the majority have reduced their ambitions to just surviving, and for some, this crisis will ruin them.
Raising capital has become extremely challenging. I know of several founders who were inches away from closing investment; those opportunities have now evaporated.
The money is still there, but those who wield it are now far more selective about where they deploy it and will take many months longer in the due diligence process to decide when to invest it. This is an economic crisis and those with liquidity write the rules. Founders are expecting that terms, including valuations, will get worse.
Customers are cancelling deals last minute or taking longer to close. Late-stage startups, which were relying on customer revenue to support an aggressive burn rate, are in a particularly precarious position and many of them are facing significant down rounds if they want to survive.
Founders have had to make difficult decisions to preserve their runway and been left on their own as they can no longer afford to pay team members. Some of them are also parents, now doing their best at home schooling their children while also attempting to save their fledgling business.
It’s not just money that is scarce. Partnerships with larger organisations can often be the lifeblood of a startup, and the current crisis has seen late-stage partnering discussions (and even contracts) terminated without notice. Those startups exposed to discretionary retail, international education or travel are in the worst position.
Startup leaders showing the way
What’s most interesting about COVID-19’s impact on startups is the leaders who are emerging from the sector. In a crisis the role of a leader is to define reality and give hope.
Louise Chen and Lisa Qi founded Share with Oscar in 2016 to make our cities more liveable through sharing. This month they saw how Australia’s nurses — the front line of our fight against COVID-19 — were desperately in need of parking so that they could safely commute to work.
So with amazing speed they launched an appeal and asked anyone who lived nearby to a hospital to make their parking space available to health care workers for free.
They’ve seen an overwhelmingly generous response from the Australian public, in a remarkable demonstration of the gratitude that our community feels towards health care workers right now.
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Stories like this are a timely reminder that the leaders in our community who will help us navigate this crisis will come from every aspect of society – including entrepreneurs.
Founders like Louise and Lisa are behaving in a way that demonstrates the values of their company. These leaders are responsible for the wellbeing of not just their company, but our communities as well.
But for every story like Share with Oscar there are many more entrepreneurs that are silently facing their own personal crisis. These entrepreneurs need urgent support to survive. However, they are often overlooked by the fiscal stimulus packages announced by governments.
Alex McCauley and StartupAUS are dedicated advocates for the sector, and it was great to see the JobKeeper wage subsidy criteria amended last week as a result of their work. I urge federal and state governments to continue incorporating this advice into their policy decisions.
In addition to financial assistance, entrepreneurs also need community help. That’s why UNSW is continuing to back our entrepreneurs in this time. Through the Michael Crouch Innovation Centre and our founders program, the University of NSW is championing students, staff and alumni to build entrepreneurial skills and grow sustainable companies. New businesses need years of nurturing in order to thrive, and in uncertain times like these this need becomes acute.
A small handful of Australian startups are well positioned to build valuable companies in response to the crisis. Most founders think they are in this small percentage — that’s why they’re founders in the first place. For those who struggle, support mechanisms must be in place.