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A Crisis Playbook: How Can Tech Startups Survive During the Economic Downfall?

When the world economic crisis is around the corner, companies of all sizes have to prepare for a challenging period in their development. Tech startups will be one of the first to feel the impact of the recession. LITSLINK expands on how to stay afloat in the new economy

To the companies wondering how to survive an economic crisis, LITSLINK advises not to stop operations but to carry on providing their services to customers, which will positively affect their reputation and save most of their repeat customers. At the same time, this period is the best time to tighten their belt and think of the best ways to cut costs.

What Has Actually Happened?
  • Coronavirus. The rapid spread of COVID-19 in the world has caused an unprecedented plunge in the global market. Wall Street is currently experiencing its worst period since the time of the Great Depression. With more than £3.9tn in losses, it has recently reported the biggest fall in value.
  • Oil-price war. When Saudi Arabia reduced its oil price by $8 per barrel, Wall Street witnessed the largest plunge since the Great Depression. On March 9, the Dow Jones Index dropped by more than 2,000 points, or 7.8%.

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How Can Tech Companies Prepare for the Crisis?

The reduction in payroll is often a necessity for businesses during challenging times. They might be forced to reduce the headcount. The best solution here is to undertake effective cost-cutting measures, such as outsourcing or out-staffing, which will provide them with significant competitive advantages in the harsh business environment:

  1. They get more with less expense. Since rates are lower in developing economies, such as UkraineIndia, and Latin America, the companies have a chance to proceed with the development process without spending a fortune by outsourcing to reliable vendors.
  2. Fast development and shorter time to market. As a rule, outsourcing companies have a rich talent pool ready to support tech startups at any stage of the development process. Even with tight deadlines, they’re likely to find a vendor to provide them with a full-fledged product.
  3. Cost-effective development scheme. Even during the crisis, there is an opportunity to raise funds. Keeping considerable costs for in-house development might discourage investors from funding private projects. By outsourcing their software development services, the startups provide investors with a cost-effective development scheme.
  4. Extend the company’s runway. Sequoia Capital, in their memo, recommends preparing contingency plans and saving as much runway as possible. Nobody knows how long this crisis might last or whether there’ll be another financial crisis. Thus, it is better to save now to be able to withstand a few more quarters.

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During economic downfall, only the strongest and wisest are going to survive. Lots of companies have already established their R&D centers in top outsourcing hubs. Even with all the challenges involved, it might become a springboard for startups into a new, prospering economy.

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