Is the Global Crisis the Best Time to Start a Foreign Company?

It is a well-known axiom that entrepreneurs see opportunities and solutions where others see problems.  One of the unique selling proposition strategies is to show your customers how your offer can ease their pain, and thus stimulate demand for your product or service. Business problems of the kind and scope we all face these months urge us to become more resourceful, ignite creativity, grow our value, and extend the horizons.

This article addresses the burning question of how to respond to the COVID-19 crisis. 

There is certainly some connection between economic recessions and entrepreneurship. According to the study published by the Ewing Kauffmann Foundation in 2009 (almost in the midst of the crisis), about 57% of the companies on the 2009 Fortune 500 list were founded during a recession or bear market. Historically, similar downturns occurred in the USA repeatedly between 1855 and 2002, with the economy’s recurrent painful contraction reported during about one-third of the entire period. It’s a well-known fact that over half of the high-profile American companies appeared during the previous downturns. What does it tell us about our economic future in the post-coronavirus world and the possible winning strategies for international startups?

To start a new foreign company during the downturn can be a successful proactive plan, particularly if the aim is to commercialize innovation. A startup with the right strategy can thrive, as it is likely to be more viable than a long-existing firm. Of course, many will fail too. But the Ewing Kauffmann Foundation’s research proves: good things do grow out of recessions. So recessions should be accepted as one of the success drivers for startups and registration of foreign companies. 

There are minds, however, who engage in apocalypse claims and discourage any agility by stating that the crisis is not the best time to start a business, and everyone should just ‘weather the storm’. When asked about facts and proof, they just repeat that ‘in the time of crisis the public demand for any goods and services declines, and there are practically no opportunities to attract investment’.

When skeptics, who always bully brilliant ideas for the fear of risks, warn you about the reduced demand and the weak investment activity, here is what you can tell them.

The reduced demand is an opportunity for startups. It offers new products and new services a much better chance because curiosity is one of the strongest human instincts. Especially in the lockdown and other situations of the COVID-19 pandemic, most people stock up on some essential supplies and are reluctant to buy some more of the mundane products.  However, an unusual offer inspires human curiosity and desire to give it a try. Customers are always delighted with something new and unbeaten. Therefore, this is when you can step in and satisfy their curiosity, promote new commodities, especially if this is your new foreign company’s products.

The weak investment activity is a chance to stand out.  While the reduced demand encourages penetration of new goods and services into the market, the low investment activity benefits the most ambitious startups by allowing them to introduce themselves and their entrepreneurial projects to the right investors.

Such determined entrepreneurs might not have been noticed by investors with compatible goals and interests before the recession if their startup ideas were in the mainstream of ‘normal’ business environment. As for the times of a crisis, what the skeptics fear can become the competitive advantages for those who dare to act boldly and creatively.

On the one hand, in the time of a crisis, there are far fewer new startups on the world market. Therefore, it could be much easier for you to attract the right investors and angels, get them interested in your project, appreciate its potential, and help you promote and implement your ideas.

On the other hand, the overall recession allows you to hand-pick investors who can provide not only money but also expertise, qualifications, useful connections for your foreign company.

There are several other benefits ignored by the skeptics but available to startups during a recession.

1. No doubt, a crisis is the toughest time for any business. Nevertheless, for a new startup, it’s the first reference point, and it just cannot fall below that ground zero in the next few years. Therefore, you are more likely to obtain the growth exponent during the crisis than on a thriving market (which might as well start falling any time anyway).
2. While the labor market is falling apart and wages are at their lowest, your startup creates jobs – the great value. The market reacts by offering you the best talents at the minimum payroll expenses. Moreover, talented professionals are more mobile in the time of crisis or agree to work remotely, so there is every chance to assemble your dream team – motivated not only by cash but by the new great ideas and prospects.
3. By launching a minimum viable product, you can test it in the open market and quickly fine-tune to the specific customers’ needs in the time of crisis. This will gradually increase your sales and help you gain your market share before the overall economic recovery and the purchasing power growth become obvious to those who’ve pulled back.

A startup with a well-tested product, a customer base, and a market growing early in the recession has a good chance to scale up quickly and expand success after the crisis. This chance depends, among other things, on the startup’s capacity to attract new rounds of investment, much to the satisfaction of the initial investors interested in a multiplier effect.

• The weak competition will benefit your new product: it will win the consumer’s appreciation and trust faster and easier than when it is constantly challenged by the unique propositions of direct and indirect competitors in the growing market.

The global crisis in 2020 forces most of your potential competitors to dismiss their staff, accumulate debts receivable, and take loans. Nevertheless, many keep on looking for the same old customers in the same places in the same old way offering the same old products and services just as if nothing has changed.

Any forward-thinking startup during the crisis is free from all such burdens.

Therefore, the bold decisions to start from scratch,  launch new products and services, open a foreign company, enter new markets, register an international company can be a feasible competitive advantage in 2020-2021.

Startup Success Factors in 2020-2021

What can secure the startups’ fast growth in the coming years? Unfortunately, there is no sure-fire winning formula. But at least four key factors can help avoid pitfalls: a great business idea, a dream team, sufficient funding at all stages of growth, and new ways of finding the target audience.

• Great business ideas are concepts of the ‘must have’ products or ‘painkiller’ services which will solve consumers’ big pain points or make their lives easier. Good inspiring examples of great business ideas can be derived from the Yandex, Youtube, or Slack success stories.

To come up with a winning idea, you need to think of your project from the perspectives of your clients, as a response to their specific problem or inconvenience. It would be wrong to struggle for the implementation of your own “brilliant” concept if only some of your acquaintances are excited about it. We are sure that the year 2020 will give rise to a scope of painful problems and difficulties for your potential customers. You should study them in detail to offer a remedy.

For example, during these months, millions of children could not attend a school or will not go to summer camps, they have to do their schoolwork at home, follow the social distancing order. No matter what age group, kids need more attention and activities during the stay-home period. The quarantine parenting means more frequent home cooking and cleaning, less privacy, new challenges of doing jobs from home amidst the torrent of interruptions and distractions. It would be enough to spend a couple of hours observing a family with kids in the lockdown to make a list of issues that are distressful for children, parents, and even pets. This experience will inevitably provide valuable insights into possible solutions.

Most inconveniences are going to disappear or become less annoying after the quarantine. But they will prompt you great business ideas if you unleash your creativity and ask yourselves how you can help people make their lives more comfortable, enjoyable, and secure.

Where there is the will, there is a way. The year 2020 is full of uncertainties that, on the flip side, offer multiple possibilities for great achievers. Noteworthy, such companies as Airbnb and Uber were founded and developed right after the economic recession in 2009. They targeted two popular problems: ‘I would like to make some extra money by renting out my car/apartment’, and ‘I want a cheaper and faster booking of a taxi/accommodation’. As a result, those startups have developed into global multibillion-dollar corporations.

The tougher environment is good for stretching your business muscles and priming your projects and ideas for action.

• The dream team. Here is one of the main advantages of starting a foreign company in 2020: for the first time in the last five years you have a choice of amazing talents who can work for you wherever they are.

Finding talents has always been one of the most important yet challenging tasks in the history of any startup. Nowadays many professionals have been left out of work and agree to work remotely rather than in co-working spaces or open-plan offices. Moreover, you would have to pay much more in 2019 to recruit talented employees and open up an office, which now seems an extremely wasteful arrangement. What matters most, many top professionals were spoilt by headhunters’ offers from competitors. The fees were hardly affordable to startups, and these talents changed jobs and companies every few years.

Today, COVID-19 has forced millions of skilled hardworking employees to work remotely or quit altogether due to falling markets and lack of prospects in failing companies. Many of them (just like you) will take matters into their own hands and create a startup relying on their own experience, vision, customer awareness, product ideas, and connections. Others will be happy to join a new company with excellent prospects.

In 2020, it is much easier to retain good employees. The old perks (free snacks, Disneyland furniture, and daily yoga classes at work) became suddenly irrelevant and outdated. This year you can win and motivate your staff at quite reasonable costs by offering interesting tasks, insurance, discounts on optional training courses, corporate trips, and/or Ikea furniture to equip their remote home-based offices. If you look around the world for international personnel to staff your company, your mailbox will be full of resumes.

Sufficient funding.

For any genuine entrepreneur, it is good news that it is more difficult to raise funds nowadays than before the pandemic, and investment terms are getting tighter. Viable projects will have access to better funds at all times. Moreover, the initial shortage of venture capital is a temporary situation. Everything is difficult before it gets done.

You shouldn’t chase after short-term tactics that worked in another economic environment. Those who kick-start with easy money will most likely fail soon. But we’d rather not look back to when they would find a business angel, a venture fund, and attract investment worth several hundred thousand dollars just by making a 10-20 page presentation. Some joke that there was so much money, especially at such money-spinning places as California, that a company could raise $120 million to build a $400 machine capable of squeezing the juice out of a plastic bag. For some worthy projects, it would be a shame.

While mediocre and mainstream startups are waiting for a more favorable general situation, the best and most promising startups do not give up. Investors have not disappeared to Mars stripped clean of all their free money.

Besides, the lean economy is becoming a trend and a success factor for any startup and is much appreciated by investors.

• Your target audience. You should never doubt that there are companies and people who are successful and need your products and services whatever happens. If you lack this confidence, then you should not start a startup.

Please remember, that the companies that succeed during a recession aren’t necessarily making more money. Take advantage of crisis prices to promote your products. If you offer something that people and businesses need, now is the best time to get their attention at the lowest cost. With marketing services reduced to a minimum, in many cases, you will be able to use inexpensive advertising channels, such as digital platforms. It is possible that barter deals and reciprocal promotion will be most effective in the pandemic and post-crisis world. You have to pay attention to your spending.

Even if your product is excellent, you need to be more creative and use smarter tools to find your client when the recession hits. Your first-year objective is to create something that at least 100 people will love, not something that 10,000 people will love. If you work hard to create something of real value, you will find and retain those 100 people, whether in 2021, 2009, or 2001. In the quest for a recession-proof business strategy, your priority is to make these first 100 clients your product advocates and agents for the next 1000 of your clients. At the first stage of your startup, the macroeconomic environment is not as important as your ability to identify and reach for your clients and tell them why you are better and more valuable than others.

It will take two or three years before you get really satisfied with your product and know your target audience. Without the right tools and information about your customer needs and experience, your business will not survive.  That is why you need to study and cherish the feedback from the first 100 of your product advocates.

In conclusion, we would like to note that the next couple of years, amid the economic crisis, will provide excellent opportunities for the development of the most daring startups.

If you venture to recognize and use your chance wisely now, you will come out ahead in the post-pandemic world with spiking sales, a set of strong business-building assets under your belt, and with a more loyal customer base. This approach will propel you to the top of success where you can keep up with the most advanced high-profile international companies.

However, genuine entrepreneurs will have to be ready to face many challenges and take calculated risks. You’ll need your business recession strategy to maintain some sort of immunity against downturns in the future.

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