The Covid-19 pandemic brought with it economic ruin; and in turn, businesses began taking a more cautious approach, resulting in a slowing economy and stagnant growth. During such a poor economic climate, most might say it is insanity to try and expand, especially if you are an SME that does not have a secure source of funding. However, some innovative minds saw opportunities amidst the storm.
Nobu Okada, founder and CEO of satellite startup Astroscale was caught off-guard by the pandemic. Throughout 2020, he saw many other SMEs and startups file for bankruptcy as the economy slowed. As large companies cut back, there was less competition in M&A deals, talented engineers were out of work and the real estate market was opening up as companies introduced remote working. Astroscale ended up buying the assets of an Israel-based satellite servicing company and hired 60 people. It also decided to move to a more spacious headquarters in Tokyo.
Okada took a massive gamble and it paid off spectacularly. As the initial panic cooled, investors eventually bought into Okada’s growth story. Astroscale said in October last year that it raised US$51 million in funding, led by aSTART, a Japanese investment company with a focus on space-related businesses.
Most companies were advised to cut costs instead of investing in more growth in 2020. Such companies were often advised by their investors to build a “cash runway” and cancel plans for fundraising if deemed unnecessary. As of 25 December, 106 companies joined the global unicorn club this year, down from 122 in 2019, according to an analysis of CB Insights data. The decline was mainly due to the drop in the number of new unicorns in Asia, from 34 companies to 20.
Socar, a car sharing company in South Korea, was another SME that saw multiple parts of its business come under immense pressure as the pandemic began to spread. As more and more people stayed at home, the outlook for the company’s core business became increasingly uncertain. At the same time, Tada, a minivan hailing service run by a Socar subsidiary, was facing strong opposition from the taxi industry. Socar was forced to stop Tada in April.
However, Socar executives were confident that the demand for car sharing would persist, stemming from previous disasters which only reduced the company’s utilisation rate by about 40 percent. Under a new CEO, Park Jae-wook, the company moved quickly, selling about 20 percent of its cars to boost cash reserves in order to develop new services.
“We really tried to win after COVID, rather than just try to survive and maintain the business,” said Wi Hyun-jong, Socar’s chief strategy officer.
As the pace of the pandemic’s spread eased in May, Socar also experienced tail winds from demand for domestic travel as going abroad remained heavily restricted. “From May to October, our performance was better than 2019,” Wi said. The company expects to generate about US$250 million in revenue in 2020, roughly flat from 2019.