When COVID-19 debuted as a novel pandemic in early March, financial markets rattled. Investors watched stocks plummet throughout the summer, while the media frenzy stirred deep fears across the nation. Since then, the COVID-19 dust has begun to settle, and stocks have gradually climbed back to pre-COVID numbers. With businesses reopening and consumers starting to spend again, investors are regaining confidence in the economy.
Moving forward, investors face an economic climate that’s been dramatically reshaped by COVID-19. The changes that businesses implemented to adapt to COVID-19 were first thought to be temporary, but companies are realizing that some of them might be here to stay.
SaaS thought leader and LinkedIn influencer Tomasz Tunguz recently spoke with Worth about how COVID-19 has reshaped enterprise and what changes will continue into the future. Tunguz is a partner at Redpoint Ventures, a private equity firm with over $5 billion under management and sits on the boards of several SaaS companies.
As business continues to be conducted remotely, a work-at-home culture that demands higher productivity has emerged, and burnout is Tunguz’s biggest fear. “The risk is burnout,” he says. “Nobody is taking vacation and there is less downtime. A big question in every board room is: How do I prevent burnout?”
The national bureau of economic research found in a study of 3.1 million people that the average workweek has increased by almost five hours. Other surveys like Monster.com’s 2020 State of the Candidate report found that 69 percent of employees are experiencing remote burnout. You might assume that working from home would reduce productivity with less managerial oversight and tempting distractions nearby, but Tunguz emphasizes the opposite. “I’m sure, if you look at it, there’s some distribution across the board. Commute time and breaks might be replaced with downtime at home, etc., but overall people are working more, much more.”
Working from home has also hampered other areas of business. Individual communication has largely stifled group collaboration which makes it difficult for companies to onboard new employees and promote company culture. “There’s a lot more one-to-one communication and less group communication. Leaders are having trouble figuring out the pulse of the company,” Tunguz explains. “It’s hard to inculcate the culture with new employees. Fewer meetings mean fewer opportunities to connect.”
In the SaaS market, negative trends are impacting the way business is done. “If you’re selling enterprise contracts, it’s slower,” Tunguz says. “Slower budget approval processes, enterprises have cut legal spend, especially contract attorneys, and any products are sold into enterprises and benefit someone being on site. The steak dinner to build rapport and trust is harder to build online.”
But the work-at-home culture hasn’t been all bad. Some side effects have prompted positive changes that are helping business efficiency. For example, moving business online has exposed opportunities to save on real estate costs. By spending more time online and less time at the office, firms are reducing their rental costs, a trend that Tunguz believes will continue in the future. “Real estate costs are going way down because of remote working. I was talking to a leader on the board of a Fortune 500, and everyone is thinking about how to reduce real estate costs by 40 to 50 percent. If you’re buying 250 square feet and reduce it to 175 [because of] the work-at-home culture, that’s a big change.”
Additionally, remote work can be a powerful recruiting tool. “I can search for talent anywhere over the world at a fraction of the cost,” Tunguz says. Business travel has also permanently changed. “Many of the largest and smallest virtual events have moved online and replicated a lot of the benefits from meeting in person; I don’t think the conference circuit will recover.”
For some SaaS companies, COVID-19 has ushered in a period of explosive growth. “People are using more of the collaboration tools, huge growth in whiteboarding apps, including MIRO,” Tunguz explains. “People are using more VPNs to secure traffic from home.” Just take a look at Zoom’s trajectory over the past year, a company whose announced earnings quadrupled revenue year over year.
Tunguz has some tips for leaders struggling to get a grip on valuing businesses through COVID-adapted changes.
“For one, take a look at the growth trajectory before COVID and after COVID…how many leads they generate, how many sales, sales cycle in days and whether that’s longer, whether or not existing customers are expanding or contracting. Does the team have a unique insight on the market? How big is the market…if the company works, is it going to be big?”