Riding Out the Covid Storm

Israeli startups are at risk. What can they do to get through the tough times?

By Terrance J. Mintner • July 16, 2020

Engin Akyurt | Unsplash

The big number is 65. That is 65% of Israeli startups will likely be unable to ride out the COVID-19 storm, according to a recent survey by the Israel Innovation Authority and Israel Advanced Technologies Industries.

Researchers spoke with 414 hi-tech startups. Of those surveyed, half said they have been “significantly impacted” by the slowdown. The rest said the virus has caused “limited” or no impact at all.

In the early months of the pandemic, the Israeli government approved a stimulus package of 180 million (NIS 650 million) for the tech sector.

It’s unclear if that amount is sufficient to help them through the crisis. If more financial assistance doesn’t come through the pipeline soon many startups could sink in the next few months, especially given the surge in new infections (around 30,000 active cases), which in Israel, has surpassed the number of Israelis who have recovered from the virus (about 23,000).

In the meantime, startups have laid off staff and taken on debt to stay afloat. According to a report by Ctech last month, since the pandemic began “more than NIS 500 million (approximately $144 million) in bank loans were taken by startups.”

What else can startups do to improve their chances of survival?

Gil Meir, Spectory’s CTO and co-founder, says they should focus on their core, cut operating costs as much as possible, and cancel projects that don’t have a clear ROI or clear strategic goal. They should also farm out their non-core work instead of keeping a large internal team for these projects.

“Revisit your offering, as there are always opportunities in slow-downs and even recessions. Offer lower-cost options to your main products/services, enter new markets that are now growing (e.g. medical, government), and partner with or merge with your competitors to create a more resilient and competitive force in the marketplace,” Meir adds.

“In slow-downs you don’t need to chase technologies just to be appealing to young candidates. This is the time to consolidate your tech-stack on tried-and-true technologies and reduce risk in projects that you undertake.”

Evgeni Tcherkasski | Unsplash

Limor Reznik is the Chief Marketing Officer at Taldor Group. She says we should assume the virus is here to stay, at least for the next six months.

“The sword is above our heads, business activity is shrinking and the sales model is changing. Startups need to ask themselves: What actions do I need to take to adapt my business model and activity to the new reality?”

Reznik offers three tips she’s gained from working with young and mature startups.

1. “Monitor your market – do extensive research about your competitive landscape and customer behavior patterns. Things are changing very rapidly during these corona days. You must stay with your hand on the pulse and constantly adapt.

“A great example is restaurants. The ones that survive, and even prospered, are the ones that listen to their customers and the needs of the market. They’ve collaborated with delivery services, such as Wolt, and brought their food straight to the mouths of loyal customers.

2. “Stand out from the competition – look at your startup and ask yourself how you’re different from other players in your market. Differentiate yourself by focusing on the needs that arose with the virus.

“This is the time for emphasizing the changes you’ve made – how well and quickly you’ve adapted to the new age.

“You didn’t adapt already?

“Now’s the time to do it and shout about it to the world. Just look at Zoom. Their market cap jumped well over $40 billion and its stock jumped more than 100%. It’s definitely no better than its competitors – like GoToMeeting, Google Hangouts, Microsoft Teams and Cisco Webex – but it has very high quality video and sound. It’s also very convenient to operate, and cheap.

3. “Be financially wise – great startups are constantly performing under tight budgets, with a knife to the throat. Most startups operate like this on “normal mode.” Now, they need to do it even more so. Handle expenses with care and mind your cash flow. I’m not advising you to neglect important assets like your employees or customers, but to do your planning right and you’ll know where’s a good place to cut.

“LivePerson, for example, saved approximately $15 million by closing its offices and shifting employees to remote work. They were happy about it, as well as the CFO.”

Reznik concludes with some words of startup wisdom.

“Look inside and see what can be improved. These are some really good times for soul searching. We all did it with our lives and families at the beginning of the crisis, and now is a great time to do it for your startup.”

United Nations COVID-19 Response | Unsplash

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