Why funding startups might be the best investment during economic distress

Why funding startups might be the best investment during economic distress
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Funding startups during economic distress by Carol Lin Vieira, Partner, Marketing and Public Relations, and Anne Szustek Talbot, VP of Content Marketing, BX3

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Q4 2019 hedge fund letters, conferences and more

At first blush, they might not seem to be the most opportune circumstances under which to launch a business. But say what you will about recessions: they force people to be scrappy. And that scrappiness can lead to some pretty promising startups.

Hedge Fund Launches Jump Despite Equity Market Declines

Last year was a bumper year for hedge fund launches. According to a Hedge Fund Research report released towards the end of March, 614 new funds hit the market in 2021. That was the highest number of launches since 2017, when a record 735 new hedge funds were rolled out to investors. What’s interesting about Read More

Take a couple of companies that since their founding during the late-2000s recession have become household names: Lyft and Rent the Runway. Both companies were borne out of needs that the founders saw in their own lives that could be applied to others, whether that was making a few extra bucks from driving, or being able to wear designer threads without having to invest a month’s rent in a formal gown.

With both of these companies well past the unicorn threshold, the venture capitalists that saw something in their ingenuity are well reaping the returns from their investments.

Venture capital is a high-risk investment, and that’s unlikely to change. This go-around, however, the ticket isn’t so much to create a new industry, as we’ve seen with the various iterations of the sharing economy but rather, to bolster the very institutions that are bearing the brunt of the effects of the coronavirus pandemic.

Below, we’ll take a look at a couple of case studies of early-stage startups with solutions that will help keep their target consumer industries—travel/hospitality and healthcare—not just surviving, but thriving beyond the current global health threat.

In turn, investment in new companies that are bringing entire industries to the next goal post should likewise show promise.

Funding Startups During Economic Distress

Case Study: Loyyal

Facing low occupancy in the face of social distancing and travel bans, hotels are looking for any way they can to reduce expenses. Enter Loyyal, a San Francisco-based startup that can reduce hotel and airline loyalty program administration costs by as much as 90 percent.

Traditional loyalty program partnership reconciliation is expensive, slow, and inefficient, which negatively impacts profitability and growth. Disparate systems among loyalty program partners (think of the United Airlines miles you can earn by staying at a Marriott) result in costly reconciliation and settlement processes, as transaction data is swapped between redemption partners in a variety of formats and schedules. The resulting settlement process between partners can be labor intensive, time-consuming and inefficient, often taking months to complete.

Loyyal’s blockchain-based products enable all permissioned network participants to share a common ledger securely and in real time. The typical back-and-forth of negotiating discrepancies with partners is removed. Loyyal’s shared ledger can practically eliminate costly reconciliation and settlement efforts, freeing up significant amounts of precious labor and cash resources.

Loyyal, which has already signed a three-year agreement with the Emirates Group, says that as the first major airline rewards program to work with Loyyal’s blockchain platform, “Emirates will achieve operational cost-savings, improve customer experiences and reduce the financial liability that inherently comes with large-scale loyalty programs.”

Loyalty programs are an important marketing feature for the hospitality industry and a key driver of customer attraction and retention. In times of want, hotels and airlines will undoubtedly be evaluating the efficacy of their loyalty programs and seeking ways to improve them. Companies such as Loyyal that can help the travel and hospitality industries slash operational overhead on these programs will be especially attractive.

Case Study: Ubihere

Being at the frontlines of the battle with COVID-19, hospitals need to take advantage of every possible efficiency to grapple with the pandemic. Every day, medical professionals face frustrating and preventable obstacles that can hinder providing streamlined, effective care. Among these hurdles is keeping tabs on the huge amounts of inventory and equipment. Not knowing where an X-ray machine is located can only compound stress in these times when quick, decisive action is all the more paramount—especially amid the high-rise, campus environment that characterizes so many health centers today.

Ubihere, a Columbus-based startup using NASA-based technology, is providing a novel, low-cost, low-power, highly accurate approach to geolocalization in a GPS-denied environment. The Ubihere tag can be mounted or embedded into any moveable asset, allowing for a nurse to see the object’s location in real-time on a tablet, laptop, or smartphone.

Imagine that you are a doctor or nurse in charge of care for a dozen high-risk patients. They need a ventilator — stat. Yet your colleagues in another wing of the hospital needed that same piece of equipment —stat — an hour ago, and you’re not sure in which room that ventilator might be. By affixing one of Ubihere’s tracking tags to high-demand, portable, medical equipment, the system’s signals can penetrate through walls and corridors to report the item’s location; accurate to the centimeter.

Instead of having to walk from room to room checking for the machine and potentially disrupting other treatment, medical professionals can head straight to the source.

Hospitals are clamoring for this technology, and its applications go way beyond the immediate crisis.

As one logistics and supply chain hospital executive put it: “There are so many avenues that we can pursue with [Ubihere], optimizing patient interaction on a nursing floor, making sure food trays are getting to the patient in a timely manner, looking at getting people in and out of procedures more efficiently, reducing wait times for patients waiting for a bed. The list is truly endless, it is a matter of identifying a challenge related to movement of any kind; patients, caregivers, equipment, supplies.”

Want to fund startups? Conclusion

Serial entrepreneur and angel investor Dan Martell believes that the best startups are created during economic downturns: “It’s easy to start a company when the skies are blue – it’s almost like a “hobby du-jour” for some. However, when times are tough, only the “true entrepreneurs” continue plugging away, creating value and building their dreams. They don’t stop and get day jobs, they figure it out.”

Investing in startups will always carry some degree of risk. It’s also an opportunity for investors to fuel innovation and help the next wave of entrepreneurs begin to patch the holes in a threadbare economy, making it that much more resilient.

As Martell has said: the real entrepreneurs will be building companies regardless of the markets, personal challenges or external forces – they only have one state: create.

Let’s foster this ingenuity and reward such creative, constructive efforts.

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Carol Lin is a seasoned public relations and marketing professional with a strong track record of securing appearances, awards, and placing articles, expert quotes, and other thought leadership content in top-tier news outlets including the Wall Street Journal, Forbes, Fox News, and Fortune. She has worked across numerous industries including healthcare, blockchain, consumer goods, non-profit, science, tech, and tax, and has won multiple awards in the PR industry. In her previous role, she led communications and content marketing efforts - including helping to launch a digital publication for the restaurant industry, Restaurant Insider - for a top restaurant SaaS POS provider, Upserve, which was a Finalist for the Content Marketing Institute’s Content Marketing Launch of the Year. Carol Lin joined BX3 to help startups and midsize companies grow by amplifying their brand within the marketplace, developing impactful content, and connecting them with media and influencers who can help contextualize and convey their messages to key audiences. She holds a BA in English from the University of Virginia and resides in Rhode Island. As a mother of three, Carol Lin is an avid spectator of youth soccer and pretends to understand what offsides means. Anne Szustek Talbot is a longtime content specialist, with nearly a decade and a half of experience covering news in and communicating on behalf of firms working in the asset management, litigation, financial technology, and tax sectors; as well as broader topics such as emerging markets, foreign exchange, and macroeconomics. Her most recent journalism position was as the online editor at Institutional Investor, where, among other responsibilities, she helmed the publication’s op-ed section and third-party thought leadership content. On the public relations side, she has earned coverage in an array of top-tier outlets including Cheddar, CNBC, Forbes, and The New York Times. Previous roles have taken Anne across borders and industries; her earliest roles were working for the senator from her home state, handling communications work, and as an intern diplomat for the State Department at the US Embassy in Tashkent, Uzbekistan and at the US Consulate General in Istanbul, Turkey, where she would return to launch her media career. Anne leans on her varied background to reach across industries and develop the most effective messaging and publicity campaigns on behalf of BX3 and its clients. Anne holds a BA in linguistics and Near Eastern Languages and Civilizations from the University of Chicago, from where she also earned her MA in Middle Eastern Studies. A native of the Minneapolis area, she now lives in Brooklyn, where she trains as a distance runner and in a nod to her hometown, has DJed under the handle Cherry Spoon.
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