Every day, it seems like the world is an entirely different place. As humans, we must constantly recalibrate our understanding of daily life just to navigate the ever-changing news cycle and societal landscape. Entrepreneurs must evolve with the forces shaping this new economic and cultural reality to create products and businesses that can endure throughout – and beyond – this time of great volatility.
What that means in practice is taking what we see in the markets and extrapolating those insights into a fresh go-to-market strategy. The impact of Covid-19 is playing out in waves: the rapid shift to digital business models, which shows us which existing technology can solve problems caused (or exacerbated) by the pandemic; and the heightened awareness of the strains within current systems such as health and supply chains, which shows us where new technology is needed.
As we think about what the first wild half of 2020 has looked like, where are the entry points of new opportunity and growth that could influence what the rest of the year and 2021 look like?
First Wave: Acceleration of Trends
We’ve already ridden the first wave (or tide) of Covid-19 and subsequent economic downturn – from a near-complete halt in air travel and office work to how we shop, what we eat, and who we see. The immediate impact of restrictions on physical interaction led to an acceleration of trends including digital transformation across the enterprise, a heavy reliance on ecommerce, and the virtual recreation of work, learning, healthcare, socializing and entertainment thanks to videoconferencing, collaborative software and productivity tools. And these worlds aren’t fully built – the innovation from companies like Clubhouse and Figma demonstrate there is a remarkably wide playing field for startups to develop industry and categorically-specific platforms. On a deeper layer, the need for reliable and secure infrastructure is constantly expanding, and has allowed companies like Cato Networks, Docker and AskSpoke to grow.
While that first wave opened up the door for many established enterprises and startups to provide critical technology that enables the current, virtual status quo of life, it also revealed overlooked – or under-prioritized – areas that sorely need innovation.
Second Wave: Addressing Gaps and Shortcomings
The pandemic has thrown many systemic flaws into stark relief. We’ve learned a few things firsthand, from experiences most of us can relate to: for example, empty grocery store shelves, delays in processing of important paperwork or the ability to secure a doctor’s appointment, and shortages of everything from crucial medical gear to toilet paper and steak. Some of us may have endured much worse, such as an inability to obtain urgent healthcare or adequate food. This shows that our domestic and global supply chains – and its underlying information technology infrastructure – are rife with inefficiencies. At best, we have to wait for items we want. At worst, lives are lost.
This has highlighted the need for a few things: a decentralized supply chain for commodities, electronics, and food, and a much-needed dose of modernization in financial services and healthcare (which, incidentally, are in higher use than ever due to the public health crisis and economic shakeup). In turn, this requires technical infrastructure for the industries that produce these goods or deliver these services, yet have been slow to transition to digital. As this technology is built, we must also evolve the ways we think about data governance and provenance in these previously offline industries. That also means the skills and requisite knowledge for many jobs will change. At the same time, product development and sales strategy must take into account the increasing role the federal government is playing – both as a distributor of funds and a partner – as well as the steady progression of companies like Apple, Google and Amazon into these industry verticals.
We’ve already seen startups like Blend and Notable Health rising up to provide digital assistants to extend the capabilities of financial services and medical providers. What has made these companies work was not just shortcomings in their respective industries that prompted their formation in the first place, but that their foundational entry point to the market was creating a system of intelligence. As I’ve discussed in an earlier essay on the New Moats of business defensibility, these types of next-generation enterprise products use different artificial intelligence techniques to build systems that transform applications as well as data centers and infrastructure products. It’s clear that there are many more opportunities with this strategy, particularly as we look at the current state of the world, and with an eye towards the post-Covid future.
Third Wave: Accelerate the Cloud
From every angle examined, the business models that have proven to be the most Anti-fragile in this (and every) market have turned out to be digital and cloud native businesses. Now more than ever, enterprise organizations as well as consumers need cost-effective, easy-to-use technology that make it possible for life to carry on. Moreover, digital and cloud native businesses are essentially pre-built for an environment like the one we are in today. They provide greater units of value per smaller spend and are inherently resilient and scalable, with the best ones possessing these qualities no matter the market or geographic location.
For the past four months, I have been speaking with both portfolio founders and CEOs as well as enterprise customers trying to understand how the landscape has changed – and will change over the next year. After some initial hesitation and slow down in sales due to economic uncertainty, we have started to see economic activity gradually resume. Customers are buying again and the enterprise pipelines are moving, albeit with a change in priorities.
Perhaps the most drastic change in this respect is the methods by which we are now selling products, and how those tactics will continue to change. No one is flying around carrying a sales bag anymore. Gone are the big tech conferences like Dreamforce and AWS Reinvent. The decision-maker is now more than ever the practitioner. Buttoned-up selling and discovery by the user is more important when there are fewer ways to reach the CIO or CISO. Now, events to connect with and reach customers have moved online, as well as in Slack communities and other virtual places where different types of buyers and users hang out online.
In anticipation of the recession we are now entering, every customer of every vertical is prioritizing cost savings immediately. Enterprise buyers also know their businesses are changing – as we described above – so projects moving their business to the cloud and online have become top priorities. Obviously, these customers want products that are easy to install and integrate, and are products with clear proof of ROI on day one. That has opened up opportunities for new product development from startups like Coda and others that provide cloud-based collaboration tools – as we heard in a recent podcast discussion between Greylock partner Sarah Guo and Box CEO and co-founder Aaron Levie – while also stimulating a hunger for technology to digitize aspects of business where face-to-face interaction has been the default.
Innovation is in high demand. With open source, api-driven go to market tools, startups now can focus on developing products that reduce friction in a number of cases such as between discovery and sales. Given the intrinsic limitations of doing business in this environment, we can ride this new wave of innovation wisely by focusing on the cloud.
