Finding pockets of upside in the COVID crisis
The COVID-19 lockdown will cause fundamental, permanent changes in consumer behaviour. GV Ravishankar outlines key categories that benefit from this shift, and offers insights on how founders can reframe the current situation and to find pockets of upside.
Published April 7, 2020
It’s hard to look away, even for a minute.
If you’re like me, you’re probably spending a couple of hours every day catching up on global corona news and tracking the latest count of cases in India. Economists are predicting significant contraction of GDP growth across the world and India is facing a slowdown that’s of a scope and scale that none of us have seen, let alone know how to prepare for, in our working lives. With so much negative news around us, it is very hard to keep a balanced perspective.
Last week, my partner Rajan and I had the opportunity to hold an AMA with founders to answer questions on how to tackle challenges during this crisis. Over 400 founders, with hundreds of questions, joined the Zoom call. What stood out for me was the desire amongst the founders to find a way to stay in the fight and to endure by looking at the situation with a fresh perspective. It is this kind of optimism and energy that keeps those of us in the VC space going!
While many people on the call had questions on how to manage the downside, there were many more on where and how to find the upside. Founders wanted to know what types of businesses could benefit from this major dislocation, what they could do to improve and how, if possible, they could take something positive away from this challenging situation. Here are some of the ideas we shared on the call on where to look for slices of silver lining amid all the grey.
The current shutdown will create a fundamental change in consumer behaviour that will drive significant online adoption across categories – a shift that will likely be permanent as a large, new segment of consumers in India get used to transacting in the comfort of their own home.
Based on what we are seeing through the eyes of our own portfolio, we are seeing significant online adoption across groceries, general commerce, gaming, education and healthcare.
The restrictions on our movement have meant many services now need to reach us at home. The challenges the lockdown posed on logistics has prompted some e-commerce startups to rethink their order and delivery models. Several e-grocers, for example, have now created options for apartment and building societies to schedule orders, as a group, within specific delivery time slots. By encouraging communities like these to group their orders, e-grocers have been able to significantly improve the economics per drop. The efficiencies gained out of new delivery options like this will prove beneficial to both e-grocers and consumers, long term.
Education, likewise, may never be the same again. Last quarter, we wrote about how EdTech has seen slow adoption in India’s schools. The startups that have seen the most growth over the last ten years are those that focus on after school study, tuition and test prep products that are marketed to parents and students. Now, even the slow-to-move schooling systems are looking at online channels as they are forced to rethink how to continue classes during lockdown. Edtech companies have received a shot in the arm with a dramatic increase in adoption as offline alternatives are shut.
With schools now blessing online learning models, we will see a significant increase in adoption of live learning in the quarters to come. Companies like Unacademy, BYJUs (which recently launched their live offering) and Vedantu will all benefit from this shift. Startups that can help simplify and ‘consumerize’ edtech to drive adoption by even the most traditional classroom teacher have a large opportunity right now.
Healthcare delivery, especially primary care, is seeing a shift to online consultations. As doctors and patients alike get used to telemedicine, it’s likely they’ll continue to utilize these platforms long term. The benefits of the model, beyond convenience, are improved productivity for both the doctor and the patient, protection against infection from hospital visits and potentially lower overall costs.
Gaming and online entertainment are seeing a significant increase in adoption thanks to the fact that people have way more time on their hands. We believe eSports will gain significant momentum and adoption.
Other forms of e-commerce, both for general goods and for food delivery, will be beneficiaries in the medium term as people will likely reduce time spent in public spaces and maintain some social distancing even as the situation improves. As a derivative of many of the above trends, the digital payment industry will continue to gain share in the payments market.
If you are a venture backed company in a business with unproven unit economics or business model, this may be a good time to step back and make changes without the burden of growth on your shoulders. This is a great time to fix pricing, remove discounts, cut down marketing and discover the true economics of the business by sacrificing some growth. This popular quote captures this idea perfectly: “When fishermen cannot go to sea, they mend their nets”.
If you are an offline business which is facing disruption, this may be a good time to significantly shift gears to adopt technology and future proof your business. COVID-19 has been a bit of a wake up call on digital transformation, highlighting how important it is to be able to engage consumers online.
If you are a well-funded business or a business with strong profits and a good balance sheet, this may be a good time to put distance between you and your competitors by doubling down on your product investments or not significantly cutting back marketing.
If you are a founder or CEO, keep an eye for the employees that are stepping up at this time and showing character. These may be your future leaders.
If you are an individual with time on your hands, it’s a great time to upskill your self – it may be hard to find this kind of a break anytime in the future! Sign up and learn a new skill or pursue that hobby you always wanted time for.
To look for the positives from this crisis, it is important to reframe our current situation and get into the right mental zone to find those pockets of upsides.
My moment of epiphany came while I was listening to Jack Kornfield, a Buddhist monk and founder of the Insight Meditation society, in conversation with Tim Ferris. Jack urges people to think of this crisis as not something that “happened to us” but as something “that happened for us”. He suggests we look at this situation as an opportunity to pause and reflect on what we could be doing better. This is sound advice for the current times and as we race to advance the fight against the virus. Find areas to reflect on, develop and work towards coming out of this stronger!