Morgan Stanley
  • Innovation LAb
  • Oct 7, 2020

How Startups Can Recover From Pandemic Disruption

COVID-19 created challenges that no startup could have anticipated. Here’s how two members of our 2020 Multicultural Innovation Lab adjusted to the new realities.

Launching and growing a business as a woman or multicultural entrepreneur has never been easy, in large part due to a persistent lack of access to capital, an issue we have researched at length. But the COVID-19 pandemic has posed even more problems for founders, as they try to navigate everything from supply chain disruptions and travel bans to lockdowns and recession.

The founders in the fourth cohort of our Multicultural Innovation Lab, an accelerator for multicultural and women-led tech and tech-enabled startups, have faced unique challenges in this new environment. They have also found ways to survive—and even thrive—thanks to a combination of luck, meticulous planning, and an ability to pivot quickly, as well as invaluable support and advice from their mentors at Morgan Stanley.

Take Isabel Khoo, the founder of Noodie Foods, which makes healthy, gourmet, shelf-stable meals that are a far cry from your average supermarket selection. Khoo came up with the idea for their first product, a healthy instant noodle, after spending many long nights at Harvard Business School eating  cup noodles—and then discovering just how unhealthy it was: “I didn’t realized all instant noodles are fried and I was waking up with a sodium headache.”

 With the memory of slurping down her grandmother’s homemade soup noodles, she thought there must be something better, and her business acumen kicked in. During winter break, Khoo booked a trans-Pacific flight. “I met with every single instant noodle manufacturer across Asia,” Khoo says, discovering once she was there that new technology made it possible to create more nutritious and tastier results.

Startup Recipe: Chaos, Add Sides of Luck

Upon her return, she converted her dorm room into a small-scale manufacturing facility (“A college campus is the perfect place to set up a test factory,” she says) and launched her online business this past January .

Things were barely off the ground when the pandemic hit, and Khoo faced new challenges. Yet, unexpectedly, her supply chain was well set up to with stand the disruption. Sourcing from small specialty vendors with back-ups already in place across different regions, she was able to sub in and out different suppliers as the pandemic began to unfold with differing geographic impact. This allowed her team to pivot quickly, and, as homebound consumers began stocking their pandemic pantries with long-shelf-life comfort food, Khoo’s Noodie Foods orders suddenly took off.

Khoo admits luck played no small part. She didn’t implement her diversified supply chain thinking they would be less vulnerable to this sort of once-in-a-lifetime disruption, but rather for their development opportunities. “With smaller manufacturers that can produce smaller batches, the rate of innovation tends to be higher. It means you can take more risk, because one production run doesn’t mean you then have to move one million units of inventory. .” Still, someone who tried 1,000 soup recipes and 500 noodle varieties before settling on her product offerings wasn’t about to be blindsided by just another speed bump. “With a startup, everything is chaos, so your mind set it always, ‘hope for the best, plan for the worst’,” she says.

An Impact Protection Company Takes the Hit, Keeps Rolling

Shawn Springs faced different issues. He runs Windpact, a technology and materials science company creating innovative impact solutions that protect the head and body from injuries and life-threatening scenarios. Having played in the NFL for 13 years, he saw first-hand the effects of concussions and other head injuries, including to his former teammate Junior Seau, who took his own life in 2012. After his passing, he was diagnosed with Chronic Traumatic Encephalopathy, commonly known as CTE, a progressive degenerative disease of the brain found in people with a history of repetitive brain trauma. “I have a lot of friends who are suffering from traumatic brain injury,” he says. “And I didn’t want that for my kids.”

After retiring from the NFL in 2010, Springs launched a company to design better padding solutions in equipment for athletes, military personnel, automobile passengers, and the like. His degree in sociology didn’t give him the technical background seemingly necessary for such a venture. Instead, Springs relied on the lessons he learned from Seahawks owner and Microsoft co-founder Paul Allen on how to both build a solid team and leverage the power of technology. “I thought it was cool that he owned a football team, but I thought it was even cooler that he founded Microsoft and was changing the world through technology,” Springs says. “That really opened my eyes.”

Within a few years, and, after assembling a team of engineering experts in material science and computational modeling,  Springs received several big awards, including with his former employer and the U.S. Department of Defense. With the knowledge gained from designing padding for football helmets and combat helmets worn by solders, he was able to expand the business to include offering data that Windpact generates.

Then came the pandemic. With professional, college and high school sports seasons put on hold or cancelled this past spring, a major source of revenue suddenly disappeared. In addition, manufacturing came to a temporary halt, slowing the production of materials for customers.  Visiting potential clients, investors and manufacturers in person also proved problematic, which was a major issue for Windpact, given the complexity of the business. But Springs, leaning on his experience as a professional athlete, worked with his team and changed the game plan to adapt to the current climate, while keeping the company vision intact.

Making a Pivot

Markus Hottenrott, a Managing Director and Chief Investment Officer of Morgan Stanley Infrastructure Partners and Springs’s “mentor”, i.e. intellectual sparring partner in the Innovation Lab, told him at one point that he needed to step up his game to stand out on Zoom. Springs had hoped to travel to Germany to meet with, among others, helmet manufacturers and chemicals companies but was forced by the pandemic to connect remotely instead. “The video, the lighting, the sound all needs to be perfect. And then the presentation needs to be especially impressive,” Hottenrott told him. Additionally, he suggested Springs focus on only the most critical part of his business, the equipment manufacturing, and put his materials data base side on the backburner.

Finally, Hottenrott and Springs agreed that one thing the pandemic highlighted was that football wasn’t the only game in town. “Bicycle and scooter sales have gone through the roof”, Hottenrott noted, and bicycle and scooter helmets offered Windpact a great market opportunity. With an additional focus on individual recreation sports, the team is primed to lead in the category moving forward.

Throughout, Springs had some wiggle room. “Working with the Defense Department, the largest employer in the world, has helped us stay grounded through the pandemic,” he says. Luck? Maybe. But partnering with the DOD on multiple projects depended on hard work, good instincts and a long-term vision for the company.

Long-term vision is something that Khoo says the Lab has been particularly valuable in imparting. “As an entrepreneur, you are so execution-focused—‘Let’s survive to the next year, let’s survive for the next five years.’ You don’t necessarily stop to think, ‘What do I need to build today to be around in 50 years?’ The infrastructure you need to put behind that business is very different. And that’s what Morgan Stanley does. They are in the business of supporting companies that not only survive, but also thrive. As an early stage company, that perspective is invaluable.”

For Khoo, Springs and the members of this year’s cohort, it’s a gift that they hope will help lead them to success in a post-pandemic world, as they cope with what’s sure to be a few more unexpected challenges along the way.

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