Most American start-ups face recently a huge of challenges to promote their growth, maintain their sustainability and increase their efficiency to survive. Most of them cannot deal with an industry-university and government triangular dynamic difficulties at different stages due to the global coronavirus pandemic crisis. The Post-COVID world will offer more perspectives for main start-ups to strengthen the economy. It seems that the last alarming number of death equal to 1,263,224 according to the Worldometer’s COVID-19 data impacted start-up perspectives. The Statista Survey (2020) advances that the share of U.S. adults who have gone into self-isolation in response to COVID-19 in 2020 around 84%. The estimated percentage change in GDP in the US is decreasing with an average equal to 2.4%.
Recently, the Haltiwanger (2020) show that, business applications in the US declined strongly in 2020. A start-up depression happened in United States recently. According to the PwC COVID-19 US CFO Pulse Survey (2020), 72% of respondents reporting that COVID-19 has the potential for “significant impact” to their business operations. And 53% of all respondents are projecting a decline of at least 10% in company revenue in this year. While 70% consider canceling planned investments.
Additionally, the expansion of the disrupted value chain with china and emerging countries damaged American productivity and investment. More recently, the level of business application according to Haltiwanger (2020) were down with an undesirable IPO climate with an increasing cost pressure and a change in terms of M&A strategies manifested by more cancelled planned investment in a highly risky scalable business environment. In terms of financial market chaotic impact, the Dow Jones Industrial Average index dropped over 8,000 points recently and the S&P 500 index dropped by over twelve percent, according to Statista (2020). Investors deterred from buying stocks and also affect the level of confidence and trust on the global stock market.
United States is still facing constraints and difficulties to maintain its entrepreneurship sustainability. Some specific domain not well considered as competitive in terms of for example: the level of R&D and the impact of commercialization strategies of patents, its administrative burden, the complexity of its institutional financial environment and the limited contributions towards innovation.
Many American entrepreneurs have a positive feeling about finding opportunities, developing start-up skills and knowledge to launch a business, taking part to network activities, accepting risks, etc. Its entrepreneurship cultural mindset well developed support new comers on the market. Many entrepreneurs didn’t face problems to find an opportunity to create a project. Facilitating exchange and networking impacted recently by the the social isolation behavior temporarily limiting main on site opportunities of networking, conferences, etc.
The availability of unique institutions, start-ups and linkages are essential to foster innovation, increase growth and leverage job creations. It deploys several institutional environment and framework facilities to foster cluster competitiveness. The level of entrepreneurship mostly depends on lower cost of entry barriers of new establishment, lower fixed cost of production, small independent suppliers and customers, etc. Early stage Start-ups creators are in needs of information, knowledge to concrete their project. Many start-ups creators have risky behavior and the unknown and unpredictable crisis affect recently their growth path.
According to Statista (2020), around 88 percent of adults think COVID-19 is a major threat to the domestic economy. The estimated U.S. travel and tourism industry loss in revenue because of the COVID-19 pandemic compared to 2019 is equal to 51.5 billion USD 51.5 billion USD. For example, the e-commerce, food retail, and the healthcare industry take advantage from it .In parallel, the decrease in terms of productivity, dysfunction of supply chain, disrupted demand, poor credits conditions, etc reallocated to others sectors and segments. A structural change happened and the actual demand-driven recession results on how the pandemic will affect their business model?
A lot of efforts deployed at early stage of their entrepreneurship cycle to develop new products, facilitate the absorption of technologies, to attract brain drain and to take advantage of venture capital opportunities, etc.
However, encouraging competency to collaborate with research center institutions and build partnership is not well channeled to maintain start-ups perspectives and sustainability. The inter-firms partnership approaches didn’t respond to R&D cooperation activities. And the channel of technology transfer to firms is depending from its assimilation, learning and adaptation limited by their level of social process and absorption ability.
According to the 500 Startups recently identified the impact of COVID-19 on the early stage investment climate and most respondents were venture capital firms and angel investors. It advance that 68% percent stated that the pandemic would negatively affect their investments. The PitchBook-NVCA Venture Monitor, advanced that the U.S. VC firms committed $34.2 billion to startups in the first quarter of 2020.
American start-ups had the entrepreneurship ability to develop product and process innovation, promote high growth, expand its internalization strategies and manage risk capital. Specifically, the American Cluster Environment characterized by the proximity between companies and public R&D entities characterized by its public financially dependent character. But, the main problem is the difficulties to promote IPR and patents, etc. For example, the process of approval discoveries and innovation for commercialization depend from the level of start-up’s’ regulatory literacy towards patents rules, institutional and legislative frameworks.
And the undesirable IPO climate actually affected its well-produced discoveries and innovation. According to the PwC COVID-19 US CFO survey (2020), over 86% cancelled planned investment and 56% changed their financial plan. But only 28% changed their M&A strategy and specifically 4% are not considering any financial actions as a result from the COVID.
The weaknesses of the institutional and legislative business environment with the presence of regulatory stringency didn’t protect innovation. According to the last CNBC Small Business Survey, 38% of small business owners expect changes in government regulations to have a negative effect on their business in the next 12 months. Readapting regulations policy with reforms and new acts for patenting and IPR is important.
The Vice President Mike Pence said that “The White House coronavirus task force could soon be history”.
An anecdote from the American President Donald Trump said that “If it’s a masked facility, I will” wear a mask”.
The expansion of the pandemic alarming impact is more than its real damage. Its optimistic version is to look after the pandemic. How many jobs will be created, how much financial resources will be allocated? Which perspective for strategic partnership, alliance and mergers are available?
For example, the New Business Preservation Act, introduced into the U.S. Senate, would try to help distribute venture capital around the country according to Pitchbook. It will reduce the VC available outside the major tech hubs.
In terms of affordable financial facilities advantages and from assets to patents commercialization, the American market had an extensive experience on mergers; venture capital and others associated options to strengthen their financial capabilities. According to Statista (2019) over 20 percent of founders advanced that they pitched to between 11 and 20 venture capital firms in 2018 during the last funding round. Cluster companies are easy to start and at a certain level, some difficulties appear depending from its willingness to regulate the venture capital industry in front of the irregular competitor’s impacts.
Steve Blank said “a coronavirus survival strategy is needed”.
He asked some interesting question: “what happen to my business? Regardless start-ups and small business actually difficulties. What does my new business model look like?
“You need to figure out your actual burn rate and runway in this new environment. Then, you need to put on place a new business model. More specifically, you need to quickly test your assumptions about customers and revenue.
Also, starting reconfiguring your business is crucial by adopting a lifeboat strategy…… for examples, rethinking on your sales strategies whatever your market and product….. As a leader, you need to plan, communicate, and act with compassion. Lastly, you need to ask how you can have easy access to capital…… the health of the venture business may depend on what hedge funds, investment banks, private equity firms, sovereign wealth funds, and large secondary market groups do…. Recognize that your investors will act in their interests, which may no longer be yours. Take action now but act with compassion”.
Additionally, Allan Wink said “How Might COVID-19 Impact the Startup Community?
He advanced that “Entrepreneurs are going to have to re-think the road to profitability for their companies”.
Finally, successful Start-ups entrepreneurs are mainly visionary thinkers who can apply their idea in concrete actions to ensure the sustainability of their projects. Start-up creators and entrepreneurs need to rethink how to adapt their responsive strategies for the post-COVID. Maybe, a lifeboat strategy or survival plan is needed to reconsider main challenges and reconfigure their goals. Whatever, you are an early-stage or a large company.
You need to take a deep breath and rethink on your road to profitability along your sustainability path!
Written by Doctor Jihene Malek