Survival of the Fittest

It’s no secret that the COVID-19 pandemic has had a devastating impact on economies around the world. In April of 2020, a survey that polled local businesses in Toronto found that 61% will not survive over the next three months, and that 76% would close down for good within five months without any assistance. By August, Canada’s gross domestic product had contracted by 11.5% within the second quarter alone. While the technology moguls in Silicon Valley have bounced back from the initial crash and have recorded all-time highs in their stock performance, the same cannot be said for most other businesses and industries. Companies that have managed to stay afloat and bounced back quickly have tended to be cash rich companies that had enough liquidity to weather the storm. One group that many would have expected to be the first to crumble has demonstrated astonishing innovation and resilience to survive in this crisis — startups.

The Dark Horse of COVID-19

Many startups, in all their agile glory, have used this pandemic as an opportunity to pivot their business and strengthen their value propositions. Station F, a start-up incubator based in Paris, surveyed over 100 investment funds about the start-ups in their portfolios. 94% of these start-ups have expressed the confidence that they will continue to survive until the end of 2020. At the time of the survey in May, 80% of these startups had some sort of pivot whether it was changing their go to market strategy, serving a new market, reorganizing internal operations, or launching a new offer. The reaction by startups to the pandemic seems to be universal as these companies leverage their lean operations and agility to rapidly adapt and be decisive in ways that large companies cannot. 

We interviewed Robert Kirstiuk and Henry Shi, the Co-Founders of Freshline and Snap Travel respectively, on how their start-ups survived the pandemic crash and emerged from the crisis even stronger than before. 

Founders at Freshline and Snaptravel, Robert Kirstiuk and Henry Shi

How Freshline Pivoted Their Entire Business During COVID-19

Freshline COVID-19 Pivot and Innovative Business Model

From Coastline to Freshline 

Freshline’s story began when Coastline’s ended. Coastline, co-founded by two friends Joseph Lee and Robert Kirstiuk, set out to revolutionize perishable food logistics worldwide, starting with connecting fisheries in the United States and Canada directly to restaurants in North America. As the company scaled, Coastline successfully opened up the Japanese market and brought local Japanese products to Canadian restaurants at a variety and price never seen before. When COVID-19 was first announced as a pandemic, Joseph and Robert had thought this might just be a two to three-week break before business was back as usual. However, by the second week, they had realized that what they had thought would be a temporary hiatus would most likely be the new reality until at least 2023. Even when things “return to normal,” the retail market would never be the same. This is when they started having conversations with their investors and advisors around what the new economy would look like for food service. One key question they sought to answer was:

“How can people get high quality food and ingredients if they can’t get it from a restaurant?” 

As week three of the new reality settled in, the Coastline team started running experiments to discover new approaches.

Freshline Co-Founders Joseph Lee and Robert Kirstiuk
Freshline Co-Founders Joseph Lee (left) and Robert Kirstiuk (right)

How the Founders Ran Experiments to Validate Their Next Big Idea

The experiments were born out of conversations with wholesalers that they had connections with. In order to determine what the best course of action for the company would be, Coastline’s team divided and conquered to test out seven different experiments. One of the experiments explored building fulfillment software for the industry, however it felt too much like developing a full-scale EnterpriseResource Planning (ERP) product. Another experiment focused on creating an aggregated marketplace, but the idea came to a standstill when the team realized there would be major logistical challenges and also be a much bolder solution than they were aiming to create as a lean company during the pandemic. The final experiment led to what we now know as Freshline, a Direct to Consumer (D2C) Ecommerce & Fulfillment solution bringing fresh and rare restaurant-level products and ingredients from wholesalers directly to consumers. 

Freshline Business Model Innovation

Introducing Freshline: Coastline’s “Fresh” Beginning 

The pivot from Coastline to Freshline was strategic and successful in addressing the “new normal” and somewhat ironic shift of its business model. Previously, Coastline was connecting fisheries to restaurants by bypassing wholesalers and middlemen like processors and traders. Now, Freshline is helping these very wholesalers jump directly to the consumer, bypassing the restaurant experience. Since the pivot, Freshline has already seen some early-stage growth and gotten great feedback from early-stage partners. Robert says that he definitely sees the opportunity being even greater in a post-COVID-19 world. When we asked about how this entire crisis may have impacted his view on innovation, he replied that his personal definition of innovation hasn’t shifted, and he still firmly believes in the definition that innovation is:

“the ability to create value in an area where value doesn’t exist or is lacking.”

Rather than viewing COVID-19 as a crisis, he believes that there is actually an increased ability for innovation because of how drastically it affected some industries. New entrepreneurs now have the ability to predict what the future would be like and start creating it now. This has certainly been the case for Freshline as they used this opportunity to help the perishable food wholesale industry for which has had little to no innovation in the past 50 years. The last major innovation in the industry was in the 1950s where the concept of creating one large warehouse and centralizing shipping emerged (commonly known as broadline distribution), leading to the creation of the major food corporations. Now with wholesalers required to react to this new reality, there is a lot of opportunity for Freshline to create additional vertical value — an area of growth that Freshline plans to continue expanding.

Click here to read how society and businesses can look to history for a blueprint of success during times of crisis

How SnapTravel Went from Burning Cash to Profitability in 60 Days 

SnapTravel Innovation Strategy in COVID-19

SnapTravel’s 60-Day COVID-19 Survival Playbook

If Freshline’s approach is the perfect example of a successful pivot, then SnapTravel’s is the ultimate embodiment for “keep calm and carry on.” SnapTravel is an AI eCommerce platform that drives hotel bookings over chat founded by Henry Shi and Hussein Fazal. The travel and tourism industry has been one of the hardest hit by the pandemic. With countries around the world imposing national lockdowns and barring foreigners from entering, airline spend in the months of March and April contracted over 80% compared to the year before. By the end of March, SnapTravel also saw an 80% drop in bookings, while still burning millions of dollars annualized due to their existing cost structure. SnapTravel, as with many other VC-backed start-ups, has placed a heavy emphasis on growth, achieving 11 out of 12 consecutive quarters of double/triple digit quarter-over-quarter growth. However, the company knew that they would need a new strategy in order to stay afloat during these times. Rather than pivoting their business model, the founders decided to focus on the goal of profitability and spent the next two months achieving just that. 

SnapTravel Business Model Explained

How SnapTravel Successfully Returned to Profitability

While the initial impact of COVID-19 was jarring for SnapTravel, the founders were able to regroup and execute a new strategy to achieve profitability. The first thing they did was align their company and employees on the new goal: “Everything you work on should be an EBITDA positive initiative in the immediate to short-term”. SnapTravel’s culture, which is built around transparency, openness, and accountability allowed the company to be highly effective in responding to a crisis because the founders have stressed clarity and focus since day one. 

On the journey to profitability, the next step, and one of the most important, was to offload non-essential expenses and make any necessary cuts. This unfortunately meant that SnapTravel had to make some cuts to staffing. When asked about these cuts, Henry replied:

“If you’re making the cut, the advice we always got was to do it once so you don’t have to do it again over time.”

For employees that stayed, the company made sure to reward them with additional equity to show their mutual commitment. In addition to staff reduction, SnapTravel delved deep into their expenses to squeeze out every cost saving, no matter big or small. This meant getting rid of software subscriptions that had low utilization, negotiating discounts with every vendor they were working with, cutting down on accounting and administrative fees, and much more. After dealing with the company’s costs, the next step was to focus on maximizing the profitability of each marketing channel. By being systematic and laser focused on their approach to achieve profitability, SnapTravel was able to surpass their own expectations and achieved the goal within 60 days, and even reached record high bookings in July. For SnapTravel, COVID-19 was a crisis that helped to shape SnapTravel’s priorities, pushing them to do what they knew they had to do but didn’t before COVID-19. Having reached their goal so quickly, SnapTravel has shifted their focus back on growth and is now twice the size pre-COVID. Achieving profitability also means that the company can afford to take some greater risks which may include expanding to other verticals like flights, events, activities, tickets, and even to acquire additional companies.

You can read more here about the exact steps SnapTravel took during this pandemic to come out stronger. 

The Star featuring from left to right: Henry Shi (Snaptravel Co-Founder), Stephen Curry (Snaptravel Investor), and Hussein Fazal (Snaptravel Co-Founder).
Source: The Star featuring from left to right: Henry Shi (Snaptravel Co-Founder), Stephen Curry (Snaptravel Investor), and Hussein Fazal (Snaptravel Co-Founder).

What We Can Learn From the Character of These Successful Founders

Freshline and SnapTravel are both startups that demonstrated extraordinary resilience and innovation to not only survive during these difficult times, but to emerge even stronger than before. While the approaches that the two companies took were vastly different, there was one common theme that emerged through the interviews: both Henry and Robert demonstrated extreme composure and an opportunity-focused approach to put out the fires and identify the next steps for their companies. Rather than letting the situation get the best of them, they acknowledged that these sudden events and risks are all just a regular part of the process of entrepreneurship. Having grit, the strength of character to continue persevering, is one of the qualities that you develop as an entrepreneur and it may be due to this that so many startups are able to recover so rapidly. Having a proactive rather than a reactive approach enables entrepreneurs to do exactly what Robert said in terms of predicting the future and creating it now. 

COVID-19 has impacted every industry and sector, making the landscape ripe with opportunities for new companies to disrupt traditional operations. Countless startups have pivoted their businesses to address new needs that arose from the crisis such as Canadian-based Blue J Legal, a startup that previously used AI to predict court outcomes but is now using their technology to help businesses and people determine government COVID-19 relief programs and credits that they are entitled to. PlanaFuneral launched after COVID-19 to help families organize and conduct virtual funeral services for their loved ones. 

The success that startups have experienced during COVID-19 is a testament to the adaptability and agility of the startup approach and lean business model. As unexpected events and risks call for rapid decision making and innovative problem solving, traditional companies should take a page out of the startups’ playbook. 

Interested in seeing how we can support you and your business in your innovation initiatives? Book an introductory call with Victor Li, Founder & CEO of Onova.
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