The CARES Act sent $2 trillion in stimulus to boost the economy, with the small business loans totaling $660 billion. In venture capital terms, the new flow of money can provide a runway for companies to pivot, to change their approach, to offer new goods and services. Three business owners share their stories, along with perspectives on where the job market is headed.
The remote virtual office
Brian Lozes is the CEO of Kinemagic, a 25-employee supplier of software for the heavy construction industry—at least until two months ago. The company’s Stratus platform was designed to simulate a large construction project inside a true virtual reality device, such as an Oculus Rift or Oculus Quest.
As Lozes puts it: “COVID-19 shut the heavy industrial world down, especially oil and gas. That really threatened our business as we saw it at the time—a lot of our work and opportunity paused.” In mid-March, the active customer leads went dark as the world went to sleep.
When COVID-19 hit, the company realized it had built collaboration tools for inside a virtual world, such as whiteboards, annotations, screen captures and video records of the in-world experience along with virtual meetings. They quickly moved to add resources to improve that experience, along with adjusting their sales efforts.
Eventually, Kinemagic had to lay off a few employees. Lozes hoped that would be a furlough, but he could not make any promises. Within three weeks, the company had a PPP loan and the laid-off staff had been rehired. The company’s pivot has led to a few small sales; as the world is waking up, the conversations are restarting. Lozes is cautiously optimistic.
In addition the company has reinvented how it sells the product.
According to Lozes: “Our old way of doing sales calls was to fly all over the country. Our new plan is to ship the device to potential customers and have our sales meeting in the virtual space. COVID-19 has changed all the rules.” The idea of a virtual sales meeting, ironically, came from multiple customers, who want to use VR tools to conduct virtual sales demos, without the cost and risk that travel currently represents.
A people platform for small business
One owner with a unique position to understand how the CARES Act is impacting small business is Edward Kim, CTO of Gusto.com. Gusto views itself as a people platform for small business. The company provides payroll, health insurance, retirement plans, and advisory services for businesses small enough to want a partner. The company processes payroll for about 100,000 small businesses, which represents about 2% to 3% of the small businesses in the United States.
Kim points out that the estimated demand for office space post-COVID is significantly lower. While the commercial office market was extremely tight at the end of 2019, with lease rates constantly rising, the pandemic changed the game in more ways than one. Not only are some businesses closing for good, but Kim adds his perspective that “We’re not going back in the office the day we are allowed to; we are going to go quite a bit later.” He adds “When we go back to the office, there are going to be a lot more people working from home. This is a chance for companies to save on lease and rental expenses.”
Google told employees to expect to work from home through the end of 2020. With slightly different wording, Facebook intends to allow work from home for the rest of the year. If you can find a way to downsize the office, working from home makes business sense. After all, Google and Facebook are doing it. (Feel free to email this to your boss. You’re welcome.)
Recently, Gusto had to add a new feature by massive request—a pause employment button. That is not a termination, which would require employees to re-enter information when they restart, but instead a delay. Kim sees this as an indicator that the economic situation is temporary. Overall, Gusto sees about a 3.7% reduction in total headcount for small businesses in their report for the completed month of March 2020. The April report should be out in mid-May.
Pivot to savings
In the meantime, there is another way. As Kinemagic helps cut travel costs, in IT, we have another rising cost—cloud computing.
James Farrier has potential customers that spend hundreds of thousands of dollars per month on cloud computing for test tooling. The company he co-founded, Appsurify, uses machine learning to find the checks most likely to find defects on a test run. That can reduce the time for a continuous integration build from a day to a handful of minutes, while identifying maintenance problems and “flaky” test conditions. The full test run will probably still happen, but it will be once a night, or once a week, not on every developer-push.
Because Appsurify can save customers money, it reports that sales calls are still happening. Even in the travel industry, where Farrier expected everything to be on hold, executives are eager to talk.
There are plenty of companies that are “just” using the Paycheck Protection Program to keep the doors open. If IT can use it to create opportunities or savings, a layoff would be foolish.