Covid-19 has changed how people think about investing, at least for now. Funds were quick to offer advice that more or less said: spend less money while making the same money or more money. Which raises the question, what were companies doing beforehand? Of course the first response is that growth costs money and startups should be growing exponentially. But there’s a wider observation here which the market is closer to accepting: supporting growth at any cost and really nasty unit economics, probably isn’t always the smartest investment you can make.
What happens next? This is the question on everyone’s mind. Do we see a L-U-V? For the uninitiated, these letters indicate the possible shapes of economic recession and recovery and - spoiler alert - no one knows which it’ll be. “V” sees the economy bouncing back, “U” a slower recovery and “L” a very long / slow one. The most common sense analysis that your writer has come across suggests that the recovery will be sector-specific; regardless of the overall shape, the shape for different sectors will differ. As investors, that means finding the sectors that are going to look more like “V” than “L”. Right about now readers of this post are probably thinking of delivery businesses as hot new sectors, but we’d caution that such business has seen an increase in demand (not a decrease as many sectors) and this demand may lull as restaurants and shops open again. And so we have to think a bit harder.
Unfortunately, we’re not about to reveal all the sectors that will bounce back with a vengeance, because we don’t know. We do believe that more people in Myanmar will continue shopping online as they’ve been forced to experience its convenience, and we expect that this increase of demand will help buoy eCommerce in general. Other services going online may also fare better than before Covid-19, though not all. Will people buy more cars to avoid public transport? Probably those who can afford to will, but private vs public transport is a very income-driven choice in emerging markets. People are not suddenly better off. In fact, the economic impacts are going to hit the broad majority of people, just think about key affected sectors: tourism, apparel, agriculture, fisheries, F&B. That’s not part of the economy, that’s the economy.
Meanwhile, investors have dry powder (i.e. money to invest) and will be supporting their existing portfolios, but also continuing to make new investments. With that acknowledged, let’s say for the sake of argument that whatever happens next there’ll be some new investments being made. Here enters the role of the Schumpeterian entrepreneur: the trail blazer who spots opportunities, takes risks and creates value which disrupts the market. Heed this: consumers and businesses are going to be looking for innovations that help them through the more challenging times ahead.
Innovations are not inventions. Invention is making a light bulb, innovation is everyone using light bulbs in their homes; innovation is the commercialisation of invention. Some countries are great at invention and innovation, others less so. But, innovation can be imported from abroad (just look at China’s growth since the 90s). We’ve seen successful and unsuccessful attempts at startups using business models already popular abroad to launch products and services in Myanmar. Obviously, not all ideas that work elsewhere will work here. But many will.
We’re not suggesting for a moment that starting a business from scratch and making it a success is easy just because the idea works somewhere else. We know that it isn’t. What we are saying is that there are tough times ahead and entrepreneurship is going to be a key component in prospering through them. And so, to anyone reading this who has recently started a new venture, we commend you. Entrepreneurs break boundaries because they take risks, and that takes guts.
Got an idea? Innovation requires executing on ideas; “Vision without execution is hallucination”, meaning that it's putting the idea into action that’s the hardest part. We can all dream of flying cars, after all. To help guide your idea, we’ve developed a pitch deck template for you which asks you to answer certain questions. Feel free to use this next time you’re pitching. And, if you’d like our feedback, send it over and we’ll let you know what we think! firstname.lastname@example.org.
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