As Inventories Fall and Capital Burns, Startups Need a Plan to Weather the Pandemic
Rachel Uranga covers the intersection of business, technology and culture. She is a former Mexico-based market correspondent at Reuters and has worked for several Southern California news outlets, including the Los Angeles Business Journal and the Los Angeles Daily News. She has covered everything from IPOs to immigration. Uranga is a graduate of the Columbia School of Journalism and California State University Northridge. A Los Angeles native, she lives with her husband, son and their felines.
Tami Abdollah is dot.LA's senior technology reporter. She was previously a national security and cybersecurity reporter for The Associated Press in Washington, D.C. She's been a reporter for the AP in Los Angeles, the Los Angeles Times and for L.A.'s NPR affiliate KPCC. Abdollah spent nearly a year in Iraq as a U.S. government contractor. A native Angeleno, she's traveled the world on $5 a day, taught trad climbing safety classes and is an avid mountaineer. Follow her on Twitter.
As the nation prepares for uncertain months ahead, small-to-mid-size companies will struggle as the crisis drags on and their financial resources dwindle, their labor pool is strained and inventories are drying up, according to experts speaking at dot.LA's "Strategy Session: Coronavirus".
Nick Vyas, executive director of USC Marshall's Center for Global Supply Chain Management, and Stewart Easterby, operating partner at Los Angeles-based venture capital firm Greycroft, painted a challenging picture ahead for companies that fuel the nation's economy.
But, the two also saw silver linings even as economists warn that the U.S. has entered a novel coronavirus-fueled recession. Companies can take steps now to weather the difficult days ahead and some may even find that their work becomes more valuable than before. Food service companies, media and direct-to-consumer offerings as well as telemedicine and remote working software has become a lifeline as more and more Americans are isolated in their homes.
"This is a once in a century sort of phenomena," Vyas said. "The disruptions we're seeing is end-to-end and it's global."
In the short term, he said, expect shortages brought on by a global run on supplies that's been compounded by freezes in some portions of the international supply chain. The impacts are likely to vary across sectors and depend on where each business sources from, but companies overly reliant on a single source are likely to be hurt more. Even if the U.S. was able to shed the virus in a matter of weeks through putting the country on lockdown, which epidemiologists say is increasingly unlikely, Vyas said it would take at least six weeks to get the supply chain fully functioning again.
Companies should be putting together plans for a prolonged crisis where consumers are forced to stay home and won't have the same disposable income or appetite to purchase.
"Think about your cash, think about your fundraising, think about your debt," Easterby said.
Startups and other small to midsize companies should be taking proactive actions to tighten up their expenses, cutting costs where they can, but not so deeply that it will leave them vulnerable once the storm has passed.
He suggests a tiered approach, so that companies don't cut functions essential to their business. Among the areas to cut costs are excessive perks, travel, and maybe pulling some employee benefits such as 401k, then comes a look at marketing and public relations, and third-party contractors. Staffing and compensation should come after other areas have been exhausted.
Creating benchmarks can help executives know when to trigger these cuts.
"You know, don't cut too close to the bone, so to speak, so when the rebound happens that you are ready," he said. "There's also a lot of opportunity here."
The great recession was followed by the longest economic expansion in U.S. history.
Some startups are accelerating their fundraising in light of the new reality as they seek to ensure they are capitalized. He said companies should look at an 18-month runway and if they are in need of a raise, they should "start sooner rather than later."
And for those looking to start a company, he said don't let the pandemic prevent your efforts.
"A great idea is always going to find funding," he said.
dot.LA Strategy Session: How Can L.A. Businesses Prepare For Coronavirus? www.youtube.com
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"The time for inaction is over."
Such was the through-line in dot.LA's Thursday panel discussion on "Measurably Increasing Diversity in the Workplace."
Joining dot.LA host Kelly O'Grady was Oona King, VP of diversity, equity & inclusion (DEI) at Snap and a member of the UK House of Lords, and Kobie Fuller, partner at Upfront Ventures. The conversation centered on what organizations must do to ensure that this moment of acute awareness of the societal issues around DEI does not go to waste.
"I am grateful that white people have woken up," said King, who has also worked in diversity and inclusion at the UK's Channel 4 and YouTube. "But my gratitude will turn back to rage if they go back to sleep."
Kobie Fuller, Partner, Upfront Ventures<p><strong><br></strong></p><p>Kobie joined Upfront in June 2016, bringing deep expertise in enterprise SaaS and emerging technologies including VR and AR. Over his career he has invested early in notable companies including Exact Target (sold to Salesforce for $2.5B) and Oculus (sold to Facebook for $2B). Prior to Upfront, Kobie was an investor at Accel and, earlier, was the chief marketing officer at L.A.-based REVOLVE, one of the largest global fashion e-commerce players. Earlier in his career, Kobie helped found OpenView Venture Partners and was an investor at Insight Venture Partners. Kobie graduated from Harvard College.</p>
Oona King, VP of Diversity, Equity & Inclusion at Snap Inc.<p>Oona King is the VP of diversity, equity & inclusion at Snap Inc. Previously, Oona was Google's director of diversity strategy, YouTube's director of diverse marketing, and before that chief diversity officer for British broadcaster Channel 4. Oona is a member of the House of Lords (a life-time appointment as Baroness King in January 2011), and former senior policy advisor & speechwriter to the prime minister at 10 Downing Street. </p><p>Oona became a member of the House of Commons at 29, the second woman of color, and 200th woman of any color elected to the British Parliament. She became parliamentary private secretary to the minister for e-commerce, and secretary of state for trade and industry. Oona was voted by other MPs as "the MP most likely to change society." In the Lords, Oona's front bench roles included shadow education minister, shadow minister for the digital economy, and shadow minister for equalities.</p>
Chief Host & Correspondent and Head of Video Strategy at dot.LA
Chief Host & Correspondent and Head of Video Strategy at dot.LA<p>Kelly O'Grady is dot.LA's chief host & correspondent. Kelly serves as dot.LA's on-air talent, and is responsible for designing and executing all video efforts. A former management consultant for McKinsey, and TV reporter for NESN, New England's premier sports network, she also served on Disney's Corporate Strategy team, focusing on M&A and the company's direct-to-consumer streaming efforts. Kelly holds a bachelor's degree from Harvard College and an MBA from Harvard Business School. A Boston native, Kelly spent a year as Miss Massachusetts USA, and can be found supporting her beloved Patriots every Sunday come football season.</p>
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Amazon is once again postponing Prime Day, the company's annual sales event, due to the coronavirus. Amazon informed sellers of the delay this week, according to reports from Business Insider and CNBC.
Amazon is tentatively targeting the week of Oct. 5 for the holiday.