The business world is no stranger to financial crises, from the 2003 SARS outbreak in China to the 2008 Great Recession. Yet even with crisis management strategies shaped by these events, few were prepared for the devastating reach and impact of the COVID-19 pandemic. This includes startups, which faced this crisis alongside the challenges typically associated with younger firms, such as uncertain access to capital loans and a higher risk-to-reward ratio than established corporations.
Still, startups responded to evolving demands with innovation, adaptability, and agility – even when government programs and traditional funding sources failed to keep up. Thanks to inherent resilience and a flexible approach to resource utilization, startups provided the immediate action required to address new and evolving needs in real-time.
Resilience and Adaptability Deliver Fast Responses
Few financial crises have so fundamentally changed our way of life as the pandemic. From going to work to dining out, every action required immediate adjustments to walk the fine line between state and federal safety regulations and maintaining operations. Two key startup attributes enabled younger companies to answer this challenge with remarkable capability: resilience and a bricolage approach to entrepreneurship.
Startup leadership often becomes familiar with navigating the unexpected by necessity. With a creative approach to available resources and technologies, startups could reorganize, re-imagine, and restructure far more quickly than larger, more mature companies.
Some of the timeliest innovations offered by startups in response to this financial crisis include:
1. Clear Masks for Clear Communication
Once reserved for healthcare providers and workers in hazardous environments, masks have become part of everyday life. However, they make interactions more difficult for individuals who rely on lip-reading to communicate. Startup ClearMask addressed this challenge with fully transparent masks that provide a clear view of the wearer’s mouth and meet Food and Drug Administration (FDA) guidelines for user safety.
2. Scalable Delivery Options Combine Safety and Sales
Perhaps no industry has been harder hit than restaurants, with customers hesitant about in-person dining. Delivery apps provide a convenient solution, but often at a high cost to independent eateries. Slice, a startup focused on local restaurants, offered a lifeline with lower fees and no-contact delivery, keeping orders flowing and protecting workers and customers.
3. Collaboration Goes Virtual
With workers out of the office and, in some cases, around the world, businesses faced a desperate need for alternative ways to communicate, collaborate, and maintain relationships. Remote work apps and solutions have flourished, including Miro. The startup’s app offers a clean, simple digital whiteboard and other collaborative tools that are easy to master with a minimal learning curve and keep teams focused on what matters – their best ideas.
The Pivotal Role of Startups in World Economies
There’s no denying that countless startups have thrived during this financial crisis. At the same time, too many new companies have been lost in the U.S. and around the world. Research from the Organization for Economic Co-operation and Development (OECD) reveals the importance of this loss due to the role of startups in global economies, with younger companies responsible for 20% of all employment and 50% of new jobs created. This same report reports a 20% drop in the creation of new companies, a reduction similar in scope to that of the 2008 financial crisis.
Such a loss is concerning not just for its immediate impact on world markets and economic growth but also for long-term development. In the financial crisis, this loss of new companies led to an eventual aggregate employment loss of 0.7% within three years and 0.5% after 14 years. These numbers underscore the need for startup success, both in new firms and those growing past the startup phase, to ensure long-term economic wellbeing across the globe.
Government Programs and Traditional Financing Fail Startups
The failure of government relief programs and traditional business financing to accommodate startups is a further cause for concern. While new business loans, short-term business loans, and other support programs have been generous and prompt, they are too often tied to conditions that exclude startups. Profitability requirements and labor-intensive administrative hurdles present an often insurmountable barrier. Accordingly, new companies are shut out from the programs and opportunities designed to support small and medium-sized businesses at a time when private sector innovation is crucial.
As a result, dynamic business funding solutions are more necessary than ever. Startups need fast, low-barrier access to capital to not only meet the innovation demands of our current challenges but to promote a stronger, more prosperous economy in the future.
LDQ Business Finance has helped countless young businesses acquire the business funding they require to innovate, adapt, and grow. LQD Business Finance offers various funding solutions, including short-term business loans, growth capital, inventory and equipment financing, and more, to ensure the liquidity required to take action on evolving needs in real-time. Contact us today for more information.