Lightspeed’s Lessons From China For Indian Startup Founders: Focus On Survival Amid Coronavirus

The Indian startup ecosystem has joined the fight against the coronavirus pandemic, as over 125 confirmed cases have emerged in India. With three deaths so far, India has not yet seen the worst of the outbreak. While many startups have advised employees to work from home, some are also offering medical support, while helping employees take up self-quarantine for Covid-19 and creating contingency plans — life has truly changed in the age of the pandemic for many people, startup founders included.

Many are saying that India is in the same place as China was almost 30-45 days back when the coronavirus had not yet been given the pandemic status. So startups may have a few lessons to learn from their Chinese counterparts. To make this happen Lightspeed India hosted a closed-door founders-only online session recently to facilitate interactions between Indian startup founders and venture capitalists in China so that each group can learn from their experiences.

The discussions were led by James Mi, partner, Lightspeed China, Udaan cofounder Amod Malviya with Lightspeed India partners’ Bejul Somaia and Hemant Mohapatra. The VC fund received over 200 questions from founders, with over 60 founders joining the session.

A founder who was part of the interaction told Inc42 that the session focused on fundraising, business environment and work from home. From the experience of China, James Mi noted that the strategy was first to focus on containment and as a result, hospitality businesses saw decline while businesses like grocery delivery grew. However, logistics was impacted negatively.

Other businesses that saw high adoption, traction and growth were digital content, video streaming, edtech among others. Mi also said that enterprise SaaS businesses saw some downturn due to the lack of face-to-face meetings, which are crucial for large sales contracts.

Shoring Up The Runway

In terms of fundraising, Mi advised founders to have at least six months of runway and first focus on optimising unit economics. However, if they don’t have such a runway, they should aim to reduce burn by cutting down unnecessary expenses on marketing and even reduce headcount if need be. Founders were also advised to find alternative financing options like bank loans.

Mi also urged startups to lock any existing offers and secure the funding to support the runway as VC funding is expected to slow down in the next quarter. He also suggested that businesses should go back to decisions taken at earlier stages to reduce burn and work on unit economics, rather than increasing market reach.

Lightspeed India’s Somaia shared a similar sentiment and said that fears in financial markets are similar to the consumer market as the capital gets scarce and selective. He said that even though financing won’t stop, it would now be more selective, focussing on quality and business fundamentals.

He noted that in such situations, reckless spending isn’t appreciated and that startups should plan in a way where they can spend 2020 without external funding. Somaia advised that the startups can top-up from the recent funding round as well if there is an interest. The trio emphasised that founders should focus on survival on priority.

The three experienced VCs also noted that the conditions are benign today but may become severe tomorrow. The impact on business from the pandemic is expected to last at least two quarters. The responsibility of businesses has changed from being equitable and fair employers to taking precautions ranging from temperature checks to masks and sanitisers.

Mi recollected that in China, even though factories were allowed to work, they didn’t have the infrastructure like masks and other sanitary needs set up to fulfil recommendations, which meant many workers couldn’t come in. So founders need to provision for all manner of things that they had not earlier.

Udaan cofounder Malviya shared the experience of work from home saying that it needs a planned approach and should be embraced correctly. He said that it becomes important to document decisions and startups should have well-defined touchpoints on a daily and weekly basis for different groups.

He said that work from home requirements are different for teams which are in operations and are on managerial work etc. Among the challenges with work from home for operational teams that Malviya noted was a drop in productivity. He advised founders to rely on products like Notion for documentation, Kettle.ai to track daily productivity and Hangouts and Zoom for video collaboration.