How innovative startups can weather crisis

By Benji Sucher, Co-founder and General Partner at Radical Ventures

From supply chain disruptions and travel restrictions, to market instability and a general slow-down in global economic activity, COVID-19 will affect every business. As an early-stage venture capital firm investing in entrepreneurs applying artificial intelligence and deep technology to address global challenges and transform massive industries, we also see the role AI technology — when thoughtfully applied — can play in moments like this.

Throughout this crisis, we’ve been in close touch with our portfolio companies. Our primary concern is the well-being of their teams. And, aside from sharing best practices in terms of guidelines about staying safe, we’ve also connected with our founders about managing the impacts of this global pandemic for their business.

The all-hands-on-deck nature of a startup is a crucible. The challenges presented by this extraordinary moment will amplify any team’s strengths and weaknesses. For startups, our guidance falls into three categories: teams, resources and planning.

Team

First and foremost, startups must prioritize the health, safety and security of their team. Any illness will have a disproportionate impact on smaller businesses with limited capacity to pick up the slack.

Aside from taking the appropriate measures to stay safe (working from home, reducing in-person interactions, etc), it’s also important to be mindful of impact on culture. For teams that are now working remotely, they need to think about how they maintain business momentum without introducing shocks to the long term culture of their company.

There are a number of useful resources on how to create effective remote working cultures, including a best practices guide from Harvard Business Review. A startup is essentially a blueprint for the larger company it will one day become — just as startup software engineers create the codebase for a core product, team dynamics at a startup end up hardcoded into the company’s future culture.

Resources

Startups are no place for the timid. By their very nature, they’re placing bold bets on building products, teams and markets. That said, we are encouraging our founders to consider what steps they can take now, knowing there may be resource constraints in the near future. These considerations include taking a hard look at expenses including hiring plans as uncertainty around revenue streams, supply chains and future financing may grow.

In terms of revenue, a global economic slowdown may create uncertainty around purchasing decisions. For companies selling into enterprise, there’s a chance that sales cycles become even more protracted than usual, or go into a sort of stasis.

This uncertainty extends to fundraising as well. As an asset class, venture capital is focused on long term investments that are typically less vulnerable to the vicissitudes of public markets. But uncertainty at this moment is being felt everywhere. The upshot is that we’ll likely see downward pressure on valuations. For startups raising new rounds of capital, they probably shouldn’t compare their valuations to companies that raised capital in previous cycles.

Planning

Startups are nimble by nature. And that’s a big advantage over incumbents. Given shifting market dynamics and demands, startups have the capacity to adapt quickly and to seize opportunities that larger companies may struggle to recognize.

It may require tweaking business plans or product priorities, but healthcare startups in particular stand to play a critical role in helping address elements of this current crisis.

Breakthroughs in artificial intelligence are reshaping every facet of medicine. At Radical Ventures we’ve had an up-close look at the potential of AI and deep learning to improve health outcomes and we believe AI will play a role in helping fight this outbreak and mitigating the risk of future pandemics.

We work with amazing startups leveraging deep technology and poised to make a global impact. We’re committed to helping our founders and the startup ecosystem navigate this challenging moment.