Coronavirus Update: Technology
- Tech giants with factories in China, including Apple, Microsoft and Facebook, are experiencing major disruption to supply chains. Due to slowdown and shutdowns of factories in the early stages of this pandemic, these companies are experiencing a shortage of parts and goods for the most profitable products in the tech world.
- “Robocalls” and scammers alike are taking advantage of the current global pandemic by offering “free test kits” and “discounted health insurance.” The FCC warns that it has received numerous reports of coronavirus-related robocall cons.
- Major global tech events attended by important technology companies are being cancelled, which will further delay or preclude shared innovations and new business partnerships.
- Stock market volatility is impacting the industry’s access to capital. The industry requires access to both debt and equity capital in order to survive.
- Communication and collaboration become a problem for companies forced by the pandemic to redeploy their workforces remotely. This is pushing tech companies to devise innovative new solutions including virtual reality programs for training, hands-on tutorials, and other communication platforms.
Watch for the emergence of new startups
Innovation will continue to play a key role, whether it is new remote workforce technology or a COVID-19 vaccine. Rest assured that human ingenuity will continue to change the world we live in. Large, established tech companies with large computing resources, such as IBM and Amazon, are assisting with the supercomputer level of calculation power needed to model data and handle logistics to develop strategies to combat COVID-19. Tech giant Microsoft is offering a healthcare bot service to organizations on the frontline of COVID-19 to help screen patients. Also in development is a new app that will tell you if you have crossed paths with someone infected by the virus. It would operate to preserve individual privacy while allowing officials to locate and track virus “hot spots.” Artificial intelligence startups will continue to identify efficiencies in supply chain management and healthcare diagnosis.
Financing and Expense Management
Many companies that are not yet cash flow positive need continued access to both debt and equity capital to survive. Tech start-ups may not be able to qualify for packages or loans because of their lack of positive cash flow and collateral. So they will be left to fend for themselves on this rocky road. Don’t wait to contact funding sources and ask for forbearance on covenants and current payments. Speak with vendors and landlords about delaying payments and make the hard but necessary decisions about whether any R&D projects should be put on hold or whether staffing levels can or should be reduced.
Over the last decade technology start-ups thrived, growing so quickly that they could not hire fast enough to fill demand. In early 2020, before the pandemic hit the United States, many of these start-ups saw the downturn and normalization in this cohort. It was a humbling shift for this industry, which has been the driving force of new job creation. With the recent outbreak of COVID-19, some states are closing non-essential businesses and, tech start-ups will face tough times.
All Work Together – Government, Private and Foundations
As the government continues to debate the “right” package for the American people and businesses, many private companies are stepping up. Facebook is working on $100M in cash grants and ad credits for small businesses in countries where the company operates. Many auto manufacturers have waived payments for as long as six months. On a smaller scale, a local restaurant is selling gift certificates and providing 25% of each purchase to an Employee Relief Fund to assist its staff who are unable to work. Many large foundations have or will help the cause going forward.
The market will continue to be volatile, but tech can help companies survive
The global community is currently having trouble navigating this pandemic, and it is hard to predict when future economic upsides will occur. Rest assured it will come at some point. However, in this extreme economic disruption, there is an opportunity for technology companies to rise up and put their innovations to the test. They are in a position to answer some of the most pressing needs created by the COVID-19 outbreak.
By nature, tech companies solve problems and fill needs with innovation. Unbound by the red tape that comes with operating a mature enterprise, tech startups are small, nimble, and able to quickly pivot. Realigning their focus and efforts to new priorities and adapting to change is a staple of the startup community. Now more than ever this will be a key differentiator for the tech sector in these uncertain times and can help these companies survive and thrive.
Technology is the baseline enabling businesses to continue operating and individuals to remain connected during social distancing. From remote workforce to distance learning to video chatting, technology will continue to lead the charge as the world looks for solutions infighting and eventually eradicating the coronavirus pandemic. From crisis, new ideas, technologies and innovation will be imagined and eventually fast tracked by entrepreneurs.
Marcum’s Technology industry team is ready to help companies work through these difficult times. For more information about the impact of the coronavirus on the technology industry, please contact:
Michael Brooder, National Technology & Life Sciences Industry group leader, at 860.760.0610 email Michael.
Coronavirus Resource Center
Have more questions about the impact of the coronavirus on your business? Visit Marcum’s Coronavirus Resource Center for up-to-date information.