What COVID-19 will do to our startup ecosystem in Latin America •

Contxto – Yes, we’ve all heard it: 2008 seems like child’s play compared to what’s coming ahead. So, what does that mean for Latin America, and what does that mean for founders?

I was recently contacted by a friend of mine asking for my opinion on what she ought to do with her business. She’s an entrepreneur, not necessarily a tech founder. She has her own coffee and flower shop. What she said left me thinking about how lucky we are in the tech and digital media industry.

I gave her my honest opinion on what I thought she should do, but at the same time, I realized most of us in this ecosystem won’t have to worry as much.

Startup employees spend most of their time working behind a computer. Sales are often done remotely, not to mention that many self-service products don’t even require an actual sales team. Operations can be run using Zoom, Basecamp, Trello, and Slack. We are certainly very fortunate.

Meanwhile, my friend’s coffee shop will certainly see a huge drop in terms of customers. And, she will still have to continue to cover a lot of fixed costs including rent. Working capital will also be costlier for her.

She asked me if she should hold off on opening her new coffee shop until this was all over. I wasn’t sure what to tell her. In my experience, it’s not the same to give advice to being the person who has to follow it. I’ve always been good at giving dating advice to my friends, I’ve also always been terrible at following it myself.

“Yes, it will be hard for all of us,” I said, “but that shouldn’t stop you from working hard and, certainly, it shouldn’t be the reason to pause your dreams and goals”. That felt like honest advice, just not sure if I would be pursuing it if I were in her shoes.

But, I realized, even if I wasn’t in her shoes, I could still make her path easier. Here’s why:

We can limit the impact this pandemic creates on our own lives by taking the necessary precautions and adapting our personal habits. If being a founder was already rough, prepare for it to get even tougher. I welcome this as a challenge and believe we will all emerge stronger and better for it—if we conduct ourselves wisely.

I will adjust a quote from G. Michael Hopf here:

“Hard times create strong people. Strong people create good times. Good times create weak people. And weak people create hard times.”

Seems like we’re about to enter that first line of that quote.

People in tech are able to have a huge impact by limiting the time spent outside and working from home. Not everyone will have the same luxury.

I truly believe that if we are able to do something, it is our moral obligation to do it.

Here are a couple of things I’d like to see happening in the ecosystem for all of us to endure this as it goes all away:

Founders

Mentalize yourselves. These will be hard times, but, with the proper mindset and agility, we shall endure.
Take care of your mental health more than ever before.
Dedicate more time to family—obviously keeping in mind the necessary precautions.
Be ruthless in ensuring the best for your users, employees, and company as a whole.

Investors

Time for you to really show off that “added value” and “founder friendliness”.
Be patient, be understanding, support the founders in your portfolio.
VC is an interesting asset class. We see it doesn’t necessarily follow the same patterns of market volatility indexes, S&P500, or even government bonds. So, do not stop investing to hold a “strong cash position”. Take advantage of it. Chances are, your continued investment will be one of the factors with the most impact in stemming the ongoing economic shock.

Teams and employees

Help your team and founders as much as possible.
Homeoffice doesn’t mean vacation time.
Exceed expectations and put the extra effort into your tasks.

It is certainly sad to see big conferences and events that brought the tech community together year on year canceled.

Contxto was invited to YC Demo Day, as well as Facebook’s F8, both of which will no longer take place offline. At the same time, I believe it was the best decision given the circumstances. We should all respect the organizer, who will most likely suffer a major financial hit in the name of the common good.

I believe it is times like these that bring the best of every entrepreneur.

A major market restructuration will request the exploration of new income streams, business models. Luxury startup lifestyles will no longer be the norm, they will have to be abandoned. Agile development with low overhead costs will have to take its place.

In other words, now more than ever, the market will not tolerate bad companies and products.

And, just as an immune system emerges exhausted but better prepared for the next onslaught of contagion, good companies will emerge as greater, more resistant companies on the other end.

Look after yourselves and each other.

-VC