Sequoia Capital, one of world’s largest venture capitalists, has called coronavirus ‘The Black Swan’ of 2020. In a note addressed to CEO and founders, the US-based investor said companies should brace themselves for turbulence.
"Some of you (and some of us) have already been personally impacted by the virus. We know the stress you are under and are here to help. With lives at risk, we hope that conditions improve as quickly as possible. In the interim, we should brace ourselves for turbulence and have a prepared mindset for the scenarios that may play out," the VC said in the note.
Sequoia estimates that it will take considerable time, perhaps several quarters, for the virus to be contained, and even longer for the global economy to recover its footing. It added that private financings could soften significantly, as happened in 2001 and 2009, and hinted at job cuts by saying that this is a time to evaluate critically, whether they could do more with less.
The novel coronavirus has already disrupted the global supply chain as most factories in the industrial towns of China remain closed. So far, it has claimed over 3,000 lives and is spreading fast in Europe, USA and India. An employee in Paytm’s Gurgaon office has tested positive for coronavirus, forcing the digital payment giant to shut its multiple offices.
While the pandemic has already disrupted legacy businesses such as aviation and automobiles, its impact can now be seen on new-age companies. Sequoia said many companies in frontline countries are facing challenges as a result of the virus outbreak, including drop in business activity, supply chain disruptions and curtailment of travels and cancelled meetings.
"Some companies have seen their growth rates drop sharply between December and February. Several companies that were on track are now at risk of missing their Q1FY2020 plans as the effects of the virus ripple wider…The unprecedented lockdown in China is directly impacting global supply chains. Hardware, direct-to-consumer, and retailing companies may need to find alternative suppliers. Pure software companies are less exposed to supply chain disruptions, but remain at risk due to cascading economic effects."
Sequoia suggested companies to question every assumption about their business, be it cash runway, fundraising, ales forecasts, marketing, headcount and capital spending. It urged them to make fast and decisive adjustments to changing circumstances.
"False optimism can easily lead you astray and prevent you from making contingency plans or taking bold action. Avoid this trap by being clinically realistic and acting decisively as circumstances change. Demonstrate the leadership your team needs during this stressful time."
PayTM shuts offices as employee tested positive
The novel coronavirus has disrupted the global supply chain as most factories in China’s industrial towns stay closed. It has so far claimed over 3,000 lives and is spreading fast in Europe, USA and India. An employee in Paytm’s Gurgaon office tested positive for coronavirus, forcing the firm to shut its multiple offices.