Startups may be some of the most vulnerable companies during economic crises, but those that survive the hardships could be positioned to become the next billion-dollar idea.
The coronavirus pandemic and current US economic decline has downsized many companies, left 17.8 million unemployed, and has severely strained even the fastest growing startups, such as Airbnb which laid off about 25% of its staff.
Amidst these crises, a recession can be a beneficial time to start a business and innovate for the future. Companies like Manhattan coworking space Luminary and Los Angeles documentary production company Nacelle, have drastically shifted their operations to adapt to the outcomes of the pandemic.
Kendrick Nguyen, CEO and cofounder of the startup investment platform Republic, sees new opportunities coming from the recession that will open up an abundance of innovation in the startup world.
“The beautiful thing about startups is they are not rigid [in] their infrastructure, which allows them to be nimble and pivot in a time of crisis,” he told Business Insider.
Republic has 700,000 users and more than 205 companies have raised over $150 million in total investments on the platform, a spokesperson for the company told Business Insider.
Nguyen predicted the industries and startups he thinks will rise out of the pandemic and recession with the right solutions to become the next billion-dollar startups.
Remote work will demand more workforce optimization tech, such as we saw with Zoom’s colossal rise
The pandemic has shown us how important it is to have the right tools to connect teams remotely. From video conferencing to task management apps, the tech industry is bound to see more startups stepping in to make working and meeting from home more comfortable.
“People are going to fundamentally change how they work and what going to work actually means,” Nguyen said.
Though Zoom — now worth more than the world’s largest airlines — gets much of the buzz, Nguyen said there are several other video conferencing platforms that have potential for growth, such as Hopin, HouseParty, and HighFive. More companies will be looking to host events for 1,000 or more attendees, which opens opportunities to platforms that can bring high efficiency and speed.
“We’ve been seeing a trend of more and more people using HopIn for conferences and the experience is almost comparable to the real deal,” he said.
The private market will become more accessible to everyday investors, the same way Robinhood democratized the public stock market
Nguyen said that people are more aware now than before the pandemic of the volatility in the public market and are looking for new ways to invest their money. “It’s very clear that just investing in Google and Facebook, that may not be enough,” he said.
In the same way investing app Robinhood made the public stock market more accessible, so will new tech companies facilitate investing in private markets, Nguyen said.
He predicts that more attention will focus on investing at early stages of a company and in small amounts, like through Republic, which allows anyone to be an angel investor, invest a minimum of $10 in a startup’s crowdfunding campaign, and earn a return if the company succeeds.
Republic recently added residential real estate to its platform to take advantage of the down market during the recession. “There’s going to be an increased appetite into safer assets like real estate, compared to a private company,” he said.
Startups could revolutionize edtech if they can scale and innovate like Masterclass
The education industry is facing volatility, particularly in higher education as colleges completely restructure their strategies for the fall. Many students will be going back to physical classrooms, while others will spend at least another semester partially or fully remote.
This raises two main challenges for edtech companies to solve, Nguyen said. First, schools need to provide a more engaging virtual classroom experience and second, more businesses providing robust curriculum and trade training will aim to supplement higher education or replace it all together.
“Companies like Masterclass, which has been in edtech for quite some time, I’m going to guess they have done exceedingly well in the past three, four months,” he said.
Digiday reported that Masterclass subscribers spent more time watching its courses beginning in March.
Telehealth has boundless opportunities for startups like Radish Health and Headspace
As more people return to offices, Nguyen said telehealth startups will step in to reacclimate employees to the workplace. “People are more nervous to set foot in the ER, hospital, or doctor’s and dentist’s office,” he said.
Republic is looking into the healthcare, testing, and preventative services it uses to acclimate the company’s 50 employees when they return to the office. Radish Health, for example, provides health solutions for New York-based companies to reopen. Virtual primary care app HealthTap offers free virtual doctor visits for those in the US without healthcare who are worried about COVID-19 symptoms.
Nguyen said mental health is an increased concern for telehealth startups as people tackle increased loneliness during quarantine. “Meditation apps such as Headspace and Calm or counseling apps such as BetterHelp and Talkspace are experiencing high user volume,” he said.
Contactless food and grocery delivery apps like Seamless and Instacart will lean on technology to scale
Uber’s $2.65 billion acquisition of PostMates goes to show food-delivery apps are growing quickly and looking to scale their operations. More people are ordering delivery during the pandemic, New York Times reported.
Nguyen is excited to see how companies further incorporate technology, such as drone delivery. “We’re going to see either the technology getting incorporated by established food delivery companies like Seamless and Instacart or that they sprout into their own operation or together,” he said.
The biggest challenge will be to lower commissions and provide a higher value proposition to restaurants and gig-economy delivery workers. “People want to support restaurants and local businesses and the fee may be too high,” he said.