How Covid has levelled the playing field between big business and Sydney startups

Covid-19.  It took the world by storm. Nobody (except maybe old mate Bill Gates) would have predicted a global pandemic. So you can’t blame businesses (big or small) for not having “worldwide lockdown” in their SWOT analysis for 2020. What’s interesting to observe, though, is how businesses approached this crisis. And the opportunities associated with it - from becoming more efficient, to pivoting or riding the wave and maximising new market trends. Google’s Mike Langford has a particularly insightful perspective on this - as his role sees him working for a global tech giant while focusing on startups and SMEs.

One of our Directors, Neil Gunning (who himself has experience with businesses of all sizes scaling and pivoting during Covid) chatted to Mike about the commonalities and differences between how big international businesses and Sydney startups approached the big “rona”. And what it means for the future.

 

Neil: “One of the wonderful things about your skills and experience is that you operate within Google, the mecca of the tech world, however, have a clear lens on the start-up ecosystem as well and therefore I would imagine are positioned wonderfully well so as to see the differences in how organisations at both ends of that spectrum have responded to the vast changes in the last year. Does the agility and nimble nature of a startup put them in a great position to take opportunities that larger organisations may not be nimble enough to take advantage of?”

 

Mike: “The impact I’ve seen from both lenses is very sector-dependent. Within the advertising space, you can imagine that advertisers in travel, auto and, to an extent,  finance fell off a cliff when the pandemic hit. But then eCommerce shot through the roof. And, of course, separate to ads, our cloud business accelerated at a tremendous pace as businesses raced to facilitate remote working.

That’s pretty reflective of the startup scene as well: some businesses thrive, some struggle to survive, some just can’t make it through. The challenge of course in the first few months of the pandemic was funding freezing up: you had great startups with strong customer and revenue growth, gearing up to raise their next round. All of a sudden they were at serious risk of going bust. Fortunately, this funding freeze didn’t last too long as the market quickly recovered, but I would say that was a really concerning time. 

None of that really answers your question but perhaps sets some context! The ability of a startup to pivot is fundamental to its success, and the pandemic provided incredible opportunities in some sectors. And yes, that can mean taking market share off the big guys. Sometimes it’s just right time, right place - take Zoom: that suddenly accelerated beyond big Tech’s heavyweight VC solutions. Or sometimes it’s a significant shift in strategy - a friend who imports phone battery charging stations quickly found a supplier to import temperature scanning kiosks and soon became a whole new business. 

And that’s the final component that I think is really interesting: it’s the startups that are created because of these opportunities. In 2008 you had Uber, Pinterest, Whatsapp, Instagram all form off the back of the GFC. This time around we see telehealth businesses, remote working solutions, mental health startups, home fitness businesses, and so on. 

I’m part of an Antler angel program, so I’m across the current cohort, and half those businesses would have made no sense two years ago.”

 

Neil: “What impactful strategies have you seen global leaders/leading organisations employ that are flexible/scalable enough that they might also be able to be applied at the start-up end of the spectrum?”

 

Mike: “From a personnel perspective, it’s about keeping teams motivated, energised and healthy. So checking in regularly with your remote team, still doing fun virtual events, and providing flexible working arrangements and mental health days have been a great benefit at Google. I was actually really inspired by the efforts of one of our Agencies, Dentsu, that released a video showcasing the struggle of working mums, and introducing a series of initiatives designed to help with some of the burden: TheyCare (instead of DayCare) kids Zooms, Wellness Wednesdays and a chore share program they named hesheworks. 

Cost-cutting is essential but I think that’s pretty straightforward - reduce your T&E, travel and most entertaining was immediately cut by default, and reduce frivolous spending. 

And then customer engagement. It’s not so much a strategy, but showing empathy, listening more, understanding how needs have changed, and responding to those changes. Everyone and every business has in some way been affected by COVID but in so many different ways. Don’t assume you know what someone is going through, ask them, seek to deeply understand, and from there you can find new ways to engage that meet their needs."

 

Neil: “Are there trends in the key characteristics of the organisations who have managed to maintain positive growth trajectories through the last year that you have witnessed?”

 

Mike:

• ”Well we covered flexibility already. This may mean pivots to their products, their customer base, how they go to market. 

• Being more efficient: so cost-cutting, obviously less travel, maybe reducing office space, less entertaining - gone are our long lunches with agencies! 
• And focusing on your core business: I know someone at AirBnb who told me that all special projects have been put on hold - the founder is an ideas guy and there are always lots of distractions, but for now, focus on renting accommodation! “

 

Neil: “What are the key actionable learnings that you hope startups have taken from COVID’s economic impact?

 

Mike: “Extend your runway - Your funding runway is always critical to be all over, but I recognise it’s hard to plan for an economic shock like this. What I would say is that similar to investing your personal money: you should always aim to have sufficient runway if something unexpected occurs.

Keep investors close - Crucially you should be maintaining close relationships with existing investors - ultimately those relationships might save you. I spoke to a number of VCs through COVID, and they all said the same thing. Some of their startups were affected negatively, some positively, and some were unaffected. The time was being spent with those that had a funding crunch, and where a strong relationship existed with the VC being closely across the business, there was a much greater inclination to step in to find some emergency funding.”

 

Neil: “Focussing on the future and confidence growing across the world, are there any real success stories that may have flown below the radar but have inspired you?”

 

Mike: “I think mental health is a long-standing and huge problem globally, and COVID has both amplified it and brought it directly into the spotlight. 

With this, there are some wonderful startups that have gained prominence, such as Headspace that doubled its number of users since March last year, adding on another 70m customers and then recently offering a free one-year subscription to all unemployed Americans. 

And then there are such a huge array of new startups that are finding unique ways to address this very serious problem. In the latest Antler cohort, there’s a startup looking to address PTSD in war veterans using VR. I honestly believe that prior to COVID, this would be considered too niche. But now mental health is very firmly on the map, this kind of business is taken seriously. And by the way, so it should, there are over 200,000 veterans that suffer from PTSD in Australia.”

 

It’s not just Mike who sees the potential in Covid-19 to be the catalyst of massive innovation and growth in startups, Tiziana Bianco from Zip Co echoed the same sentiments when we chatted to her recently on Lessons about growth in times of change. And with big brands like Airtasker listing on the ASX and Phocas raising $45mil it’s promising to see the spirit with which Aussie tech businesses are approaching 2021 and beyond.