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Coronavirus Business Impact: VC Gives Tech Startups Call to Action

The coronavirus (COVID-19) outbreak coupled with an oil war have combined to trigger a U.S. bear stock market — pushing stocks down 20 percent from their record highs in February 2020. But this is more than a Wall Street story.

Businesses of all sizes — including technology startups — are now bracing for potential shifts in hiring, worker locations, revenue slowdowns and perhaps even layoffs.

The bear market arrives roughly one week after venture capital firm Sequoia Capital urged its portfolio companies — including technology startup founders and CEOs — to question every assumption about your business.

In a March 5 blog recapping the memo, Sequoia warned that some companies have seen their growth rates drop sharply between December 2019 and February 2020, and that “several companies that were on track are now at risk of missing their Q1–2020 plans as the effects of the virus ripple wider.”

Even  pure software companies — which are “less exposed to supply chain disruptions” — will “remain at risk due to cascading economic effects,” the VC firm warned. Moreover, the VC called on startups to closely question every assumption about their business — including cash runway, fundraising, sales forecasts, marketing. headcount and capital spending.

Layoffs and Small Business Loans

Meanwhile, the coronavirus continues to threaten the service and gig economies — particularly retail workers and on-demand workers who provide customer service.

The coronavirus (COVID-19) outbreak and its impact on the economy will likely trigger four waves of layoffs, according to Challenger, Gray & Christmas, Inc., an employee outplacement and executive coaching firm.

Amid the economic concerns outlined above, the U.S. federal government, along with state and local governments, are taking steps to assist businesses.

For instance, President Trump on March 6, 2020 sign an $8 billion emergency funding package bill into law. In addition to funding emergency health care efforts, the package will boost Small Business Administration (SBA) loans and lending programs to support U.S. small businesses impacted by the coronavirus (COVID-19) outbreak.

Alto, the White House is preparing a temporary extension of business sick leave another benefits for employees across all industries, Bloomberg  Radio reports.

Potential MSP and Channel Impact

No doubt, the economic turbulence will impact MSPs and channel partners. Even recurring revenues won’t shield partners from a potential recession.

If businesses implement layoffs or employee furloughs, that could promote lower per-seat revenues for MSPs and cloud services providers.

President Trump is expected to address the nation at 8:00 p.m. ET on Wednesday, March 11, to further address economic and health concerns tied to the coronavirus.

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2 Comments

Comments

    Ryan Grant Little:

    One thought I had is that, this will mean a lot of companies will be shifting to remote work/home office for sustained periods of time, and often for the first time. This could put lots of demand on MSPs to help manage that kind of transition. Would be curious to hear from MSPs if this is the case(?)

    Joe Panettieri:

    Hi Ryan,

    Thanks for the note. No doubt, that’s been the core MSP conversation amid the coronavirus pandemic. We cover that angle in this article. However: We’ve been careful not to hype video conferencing, remote networking, etc., as cure-all revenue opportunities.

    The short answer: MSPs have evangelized remote support for two decades. They’ve pitched digital transformation for two years. Now, MSPs have to live up to those brand promises as customers shift to home offices.
    -jp

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