The coronavirus dip is worse than anything startups predicted
For the last couple of years, startups have been preparing for a recession, but the coronavirus pandemic and its effect on the economy are unlike anything they predicted.
Why it matters: Even companies that had recession plans and have been modeling burn rates, cash flow, and dips in business are throwing those projections out the window and taking drastic measures.
- Last October, co-founder and CTO Ilan Twig told Axios that the company had been preparing for a recession with cash in the bank and modeling potential decreases in business travel.
Between the lines: Whatever TripActions predicted about a recession was much milder than what it’s facing right now, as business travel has essentially dropped to zero across the U.S.
- "You don't see a recession — you see stoppage of usage," TripActions CEO Ariel Cohen told Axios on Thursday. "It will be extremely irresponsible of me if I tell you right now that I know if we’re going to lay off more people because I don't know this.”
- Lime is reportedly considering making cuts, despite president Joe Kraus telling Axios in January, when the scooter rental company laid off 14% of its workforce, that it had no plans for more reductions at the time.
"This situation is one that virtually no one was prepared for," says Shift co-CEO George Arison, whose company recently announced salary cuts and furloughs.
- "I mean, who would have ever thought that our entire economy would be 'shut down' for a month or longer?"
The big picture: Companies are rushing to stretch out budgets for as long as possible, given the fog of uncertainty hanging over the economy.
- While the White House is repeatedly saying that it wants to ease up restrictions in coming weeks, experts are predicting longer shut-down periods, making it difficult for startups to know just when they’ll see their businesses bounce back or be able to raise new capital.