How are Asian startups dealing with the side effects of COVID-19?
COVID-19 is changing the way we live and the way we do business. Asian startups must find ways to overcome and adapt to this challenging situation
The COVID-19 outbreak has brought the world to a standstill. Almost every industry is suffering because of the crisis. Startups in the Asia Pacific market have also felt the side effects.
What’s more, some of them were the first to feel the power of COVID-19. So, let’s see how they are dealing with the current situation.
Impact on Asian startups
Venture capital investments in Southeast Asia have been the economic driving force for many years. The startup culture was thriving across the region. Savvy investors and successful entrepreneurs formed partnerships that generated profits.
In December 2019, the situation quickly changed, and the pandemic caught everyone off guard.
One thing is sure, though—most startups in Asia are facing a bleak outlook. Even unicorns such as Gojek, Bukalapak, or Grab are not in the safe zone. They must also come up with effective coping strategies to survive the pandemic.
Many startups in Asia are online-based, which allows them to deploy work-from-home policies. However, a significant number of companies failed to adapt to a new way of doing business. As a result, these startups are hanging by a thread and fighting for their lives.
Economic activity in the Asia Pacific region
As soon as the epidemic emerged, Asian countries started adopting emergency measures. In most cases, the governments reacted quickly and effectively. The authorities banned all gatherings, and they also closed borders.
Likewise, safe distancing measures have become the norm. So, how did these emergency actions affect economic activity in the region?
Well, the term that could best describe the situation is a disaster. The stocks are plummeting as we speak, and fundraising is experiencing a seven-year low.
More precisely, statistics revealed that Asian venture capital firms managed to raise US$2.2 billion in the first quarter. This amount is the lowest in the past seven years, which says a lot about the effects of COVID-19.
The industries that suffered the most were tourism, travel, and hospitality. Any investments in these industries lost their value because of the pandemic. On top of that, the mantra for capital investments seems to be “save cash.” In other words, everyone is waiting to see what will happen with COVID-19.
As a result, very little funding is available for Asian startups, which puts venture capital firms in a vulnerable position. In a way, startups must fight for their lives without asking for anyone’s help. That said, here are some of the best strategies for surviving the COVID-19 pandemic.
Overcoming the crisis
As we said, the novel coronavirus has hit the Asian financial markets like a ton of bricks. A vast number of corporations and enterprises are facing liquidity problems.
Meanwhile, the governments have issued a series of measures to alleviate the effects of the pandemic. The reduction in tax rates was one of those strategies, as well as capital injections.
Nevertheless, the lack of “mega deals” is evident. So, how can startups survive the storm?
Well, many entrepreneurs decided to cut outsourcing contracts as soon as COVID-19 became a widespread threat.
Likewise, startups in Asia Pacific have initiated pay cuts. Admittedly, this unpopular move will not help you make new friends. Yet, cuts are sometimes necessary, and a pandemic is one such situation.
Of course, the best course of action when it comes to paying cuts is to start from the top. Management teams are the ones that need to shoulder responsibility and accept a temporary reduction.
Another essential tactic in this trying time is the exit strategy. For that reason, savvy entrepreneurs in Asia have reviewed their exit plans in recent months.
But if you do not want to abandon ship just yet, fresh funding is of paramount importance. Thus, startup owners in Asia need to work day and night to find suitable investors.
Of course, this might be easier said than done amid the turmoil. At the same time, entrepreneurs need to understand that you need the hottest fire to forge the hardest steel. For example, the rise of Alibaba began during the 2002–2004 SARS epidemic.
What to expect ahead
Without a doubt, COVID-19 has forced Asian startups to leave their comfort zone and step into the spotlight. Entrepreneurs and investors are now in uncharted territory, which makes it hard to predict the future.
Nonetheless, some trends are already visible.
For instance, startups that are involved in the education industry could be flourishing in the years to come. The so-called edutech apps are on the rise, and the same applies to video conferencing software.
Online learning tools have proved their worth during the pandemic. As a result, this sector is already receiving massive funding.
The same goes for e-commerce platforms. During the lockdown, e-commerce stores saw an enormous rise in demand. Since online business is in their DNA, most of them adapted quickly to the new market rules.
In the future, e-commerce startups could flourish in Asia as well as the rest of the world.
Likewise, streaming services could see a spike in demand if a distancing policy stays in place for long. Thus, startups with a focus on Asian production could thrive in the years to come. Also, podcasts are an exciting market segment, and plenty of entrepreneurs are eager to jump on the bandwagon.
Last but not least, we should mention the importance of healthcare in the post-pandemic world. Once we deal with COVID-19, the world will need to raise the bar when it comes to medical assistance.
So, telemedicine is a promising market for aspiring investors. Also, entrepreneurs in Asia could focus on AI-based healthcare systems. In any case, the goal is to lower the costs and provide better medical care.
Similarly, the rise of big data could provide startups with a chance to exploit vast databases and come up with a wide array of digital services.
COVID-19 is changing the way we live and the way we do business. As a result, Asian startups must find ways to overcome and adapt to this challenging situation.
Even though the devastation caused by the pandemic could reach epic proportions, the same could happen to improvements. In other words, COVID-19 could force us to make quantum leaps forward.
It remains to be seen if Asian entrepreneurs will manage to find their way around the new virus and improve their financial results.
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