How can we respond to the coronavirus pandemic, mitigate risks and damage, and still transform it into growth? Innovation plays the attack.
This open letter is an invitation for the Brazilian ecosystem to play in the attack, become more antifragile and being able to take advantage of what can be an immense opportunity to transform Brazil through innovation.
From startups that can help mitigate the impacts of COVID-19 in the economy and in business, to initiatives to be addressed by other investors and corporations, we point out some of the alternatives for survival and prosperity even in a time of ample uncertainty and crisis.
Coronavirus and impacts on the economy
The coronavirus has become a pandemic and there is a geometric progression in the number of people infected and also in the economic impacts. While we leave the biomedical part to infectologists, we focus on the repercussions in the business world.
But what can happen to the economy due to the pandemic? No one can be sure.
From the best futurologists to the chief economists at the world's leading banks, no one can predict the next steps. The data shows that measures considered “drastic”, added to a strong civic sense, can contain the outbreak within three months.
Ray Dalio, data-driven decision guru, has already lost 20% of the equity of one of his major hedge funds. Warren Buffet, Luis Barsi and LAPB say they have a cart full of good shopping. In Whatsapp groups, it is not uncommon to find reports of angel investors and VCs pausing deals in the final stages and revising their appetites for 2020.
After years of bull market with one decade manufacturing unicorns, decacorns, zebras and mega-funds, those born in 1980 are finally being able to live through the anguish, anxiety and the (of) flavors of a crisis.
For Sequoia, the American fund, the uncertainty brought the biggest Black Swan of the decade. It is also necessary to discuss how an unprecedented crisis for younger entrepreneurs and investors can create Antifragility - this, incidentally, is the key point of the situation. Not only how to survive what we are experiencing, but how to get the best out of it and grow from it.
If you have skin in the game and bet on the Brazilian ecosystem of startups and innovation, this message is for you.
In a crisis, the scalability of uncertainty is, paradoxically, the only certainty that Founders, VCs, Angels, Executives and other agents of the ecosystem have in hand.
Startup entrepreneurs and investors are the biggest risk takers in any country's economy.
It is in these moments that the purpose of impacting markets through innovation prevails, where the real agents of change flourish and that established companies become more creative in solving complex problems.
Those who lead the revolution are born in these moments.
The money available to startups via VC in the world has grown since 2010, on the order of 21% per year, that is, the cliché that every crisis brings opportunities has never been so factual in the world of innovation.
Brazil spent the past decade creating its ecosystem. Today we have everything we need to enable scalable innovations. Funds, accelerators, angels, incubators, corporate and government initiatives, academia, exchange programs and associations. All at the service of more than 13 thousand startups.
Startups that are acting against the coronavirus
Our entrepreneurs don't sleep on the spot. And they are already making it happen.
THE Hi Tecnologies, from Curitiba, created a 10-minute rapid test for coronavirus at a cost of R$ 130.00. As a comparison, an H1N1 test in a reference laboratory in Brazil costs between R$ 1,500 and R$ 2,000, and takes up to 24 hours to launch the result.
THE Gonew.co and the ABStartups launched the initiative #StartupsVsCodiv19. There are almost 30 startups and large companies that, together, already offer a solution to several challenges to fight the coronavirus pandemic: from prevention to the Home Office, through diagnosis and awareness.
THE Salvus, healthtech pernambucana, is accelerating the development of its O2 consumption monitoring system, so that hospitals and home cars are 20% to 30% more economical in this fundamental input.
And a good surprise with a hint of hope has emerged in the past few days. The Federal Government, through the Ministry of Health, launched in record time an app to answer questions and perform remote screening for COVID-19 suspects. The app works well and is available for all platforms.
Telemedicine will finally have its opportunity to demonstrate value, if regulations are effectively implemented. Another example of a possible agenda to be articulated and accelerated between the State and the Private Initiative.
Startups that help with remote work
Solutions like Netshow.me, Polichat or even the giant Google are being instrumental in reorganizing the face-to-face commitments suspended by several executives from large and small cities, giving the necessary agility so that the economic and financial damages are as small as possible.
Reducing the impact is the watchword, and striving for normality (along with all precautions, of course) should be the goal. For this, technology and creativity are in our favor.
It is also essential to point out that the legacy of the ecosystem, built from the decade of 2010, already echoes positively in our way of life and reduces impacts of the coronavirus.
Giants like iFood, PagSeguro and Stone play a key role in the mobility of large cities. If this crisis occurred five years ago, we would probably already have a much larger volume of disruptions in retail (including food services).
But our habits are transformed by technology, and today millions of meals a day are already taking place without crowding due to the combination of services that are almost essential for a segment of society.
E-commerce will also be an important vector for maintaining consumption. The traffic of the websites since the first contamination has been increasing, and players that act in the back office of the chain, how GoCache, Best Shipping and VTEX they are being instrumental in providing the necessary foundation for platforms, micro-entrepreneurs and consumers to successfully complete their transactions.
The impacts on the economy, agriculture and exports
The “stocking” behavior is putting pressure on prices, messing up logistics and exchange rates, as well as challenging international trade. The GDP growth forecast for the main economies in 2020 is negative. Revisions for Brazil are already pointing to below-expected growth, between 0.5% and 1%.
Too much volatility, too many opportunities.
Our ecosystem is ready for a positive revolution in the most thriving sector in Brazil. Startups like Agronow, Agrosmart and Arpac, when used together on a single farm, can create a system of very high productivity, in addition to leaving a necessary legacy for the future of Brazilian agribusiness.
However, we do not have multimodal logistical systems worthy of our nation's immensity. Startups like Logcomex, CargoX, Cheap2Ship and TruckPad they are (often together) curing the real pains of entrepreneurs and corporations of the most varied sizes and sectors, and creating a mass of invaluable data for the country's logistical planning.
And despite the fact that the Brazilian banking system is very modernized, the friction for SMEs to obtain credit in a competitive way and services with dignified experience are still very far away. Cases like Nexus, BizCapital and the newbie Cora they are on a relentless quest to resolve such pain.
In times of crisis and low consumption, there is a huge risk that several small entrepreneurs will go bankrupt due to low demand and a shortage of working capital. We need to help small entrepreneurs. They are the ones that guarantee a good part of the country's jobs and turn the GDP around.
What every entrepreneur can do
We spoke with several entrepreneurs to understand what they are doing to overcome this turbulent phase without leaving growth aside. The good news is that several of them have a common agenda.
Surviving the first impacts of the coronavirus crisis is the first element to thrive. In general, the preventive measures to overcome the turbulence with greater convergence are:
- Intensify the commercial effort, putting everyone to sell;
- Stretch the runway with postponement of non-priority hiring;
- Double or triple the internal communication effort with employees, customers and investors about their next steps;
- Revisiting the product roadmap for the coming months, with a focus on retaining current customers;
- Attention to the contracting of tools with quotations in dollars, given its volatility at the current moment;
- Renegotiating contracts, debts and payment terms - taking advantage the new Febraban agreement.
The first recommendation is that partners and employees discuss some fundamental points. For the discussions to be fruitful, we are suggesting an initial checklist with key questions that can be used with your team.
- Pre-Mortem: What can go wrong to the point where my startup / squad / fund / company simply dies during the crisis? And what practical steps are we taking to mitigate such a catastrophe? Do we have a deadline and responsible?
- Data-First & Pareto Lover: For the spheres of sales, expenses, product and operations, what are 20% of the things I am doing that will generate 80% of the positive impact on the growth of my enterprise, even in the crisis? Am I using the best data sources to assess impacts?
- Owner of his own path: What actions am I taking with clients, partners, team, competitors, government and academia to create real alliances for growth? What level of attack am I playing, high or low?
- Frankness: Am I acting ethically? Am I making expectations clear to people and my main stakeholders?
- Hospitality: Am I empathizing with civil society by adopting preventive practices to fight the virus, and putting the general well-being of Public Health first?
We believe that initiatives like the measures taken by Loft, the temporary closure of the Cube and the Darwin Handbook of Good Practices are great sources of inspiration to support the ecosystem in creating effective preventive measures against the coronavirus.
Regarding cost cutting and possible layoffs, several entrepreneurs mentioned that they are reviewing their expense matrices, but they were practically unanimous in saying that the cuts cannot impact the long-term view.
ACE believes that being the owner of your own path, being obsessed with data, focusing on the essentials and having excellence in execution are essential ingredients to get through this crisis. Of course, no one will pass unscathed, but some scratches strengthen and are necessary.
In times of crisis, high-performance founders and CEOs are really forged. Real startup entrepreneurs think about the long journey. Just like the real investors in the ecosystem.
The opportunity is given. We are optimistic, and we know that many giant and innovative companies will be founded in the coming months.
We also have an obligation
At ACE, we adopt the measures guided by the competent health agencies (as home office whenever possible, cancellation of events with more than 50 people, among others) and we openly discuss with our employees, resident startups and corporate squads.
Our decision, for precautionary measures, was more basic than ultra-strategic. We all have friends and loved ones who have passed the age of 60, or who have some pre-existence of cardiorespiratory pathology.
Even if you do not have this profile in the social circle, there is a need to put yourself in the shoes of these people and put an eventual selfishness aside. Empathy and hospitality are key attitudes in the prevention and containment of the coronavirus.
We, who have the possibility of flexibility and home office, must also help those who do not have the same privilege. But how?
Supporting local businesses and businesses, even with distance purchases or services that can be used when the coronavirus pandemic passes. And she will pass. For now, we need to protect our country's small businesses and entrepreneurs, as they are the foundation of our society and economy.
Playing in attack is the number one rule for those who want to get out of the crisis stronger.
We are addicted to growth
ACE reinforces its commitment and encourages the entire ecosystem in this moment of crisis to play the attack, to transform Brazil through innovation and to maintain investments to support the startup ecosystem with the greatest possible impact.
We will not take the foot off your investments in 2020, we invite all VCs and angel investors to do the same. We are even open to co-investing to mitigate risk and increase the volume of invested startups, especially in the Seed Stage, the highest mortality rate for good projects in the entrepreneurial journey.
We are not comfortable with the status quo and with the primers ready. We are causing our portfolio, our team, our friends, customers, partners and all agents of the ecosystem to discuss the impacts of the crisis with their networks.
And, mainly, how we will come out stronger.
We all want # playing in attack.
If you understand that this material generates important reflections, feel free to share. Our intention is for this material to be a lively discussion of the entire ecosystem.
This is the time to transform Brazil through Innovation. This is our purpose and our commitment to the ecosystem.