Startup Survivors: The Challenges of Entrepreneurship during the Pandemic

The impact of COVID-19 has varied across industries, and some businesses have even had to shut down their operations to make up for exceeding costs. Iconic companies like J.C. Penney and Neiman Marcus have failed to make substantial profits and filed for bankruptcy as a result. Certain industries such as retail have suffered, as fewer consumers have purchased items in stores. The crisis has hampered the productivity of many companies, forcing them to shift to online channels for their daily activities.

In particular, startups affiliated with Northwestern have had to overcome many problems with logistics and efficiency. These issues, including a complete shift to remote activities, have tested the resolve of these blossoming companies. Despite the difficulties, the pandemic has also revealed the resilience and commitment of entrepreneurs to seeing their ideas come to fruition.

Surgical Innovation Associates (SIA) is a startup founded by Northwestern alumnus Alexei Mlodinow. It is an academic spin-out from Northwestern medical professor, plastic surgeon, and co-founder Dr. John Kim’s innovation. Mlodinow was originally given an opportunity to use Kim’s patent as an experiential learning project while completing his MBA at the Kellogg School of Management. Eventually, this project grew into a full-fledged company.

SIA focuses on introducing new cost-effective medical devices that advance the field of plastic surgery and provide better outcomes for patients. Their signature product DuraSorb, a fully resorbable knitted mesh, provides support to soft tissues during the healing process for wounds.

“A lot of sectors will change how they do business permanently coming out of 2020,” Mlodinow said. “Our company is [operating] under budget, and revenues have been delayed. But frankly, on a net basis, we have done better than anticipated in the last year.”

He explained that part of this was due to having a nonsignificant burn rate and the team’s ability to adapt to the new work environment. “This included learning how to make sales over Zoom, performing cold calls in a traditional way, and making money through conference calls rather than in-person visits,” said Mlodinow.

Mlodinow attributed the success to his team of quick learners and the small size of the company.

“When the pandemic occurred, we immediately had to close the office and adjust our hiring plans. However, we were well suited because of our organizations and personalities,” he said.

Mlodinow stated that there was a degree of morale that came from being together in an office that was initially lost. However, they began implementing Zoom happy hours and team dinners to create a strong culture and improve satisfaction among employees. A lot of the camaraderie was revived through the team adapting to make activities remote.

SIA is not the only Northwestern-affiliated startup to adapt its response to the pandemic. Angiotensin Therapeutics Inc., a biopharmaceutical company founded by Daniel Batlle at the Feinberg School of Medicine, uses variants of an enzyme called ACE2 to treat kidney diseases by making them more efficient. ACE2 is an enzyme attached to the membranes of cells located in the lungs that helps reduce blood pressure. When the pandemic began affecting millions of Americans, the company shifted its focus to applying its unique ACE2 variants to treat COVID-19 and other potential Coronavirus outbreaks. The ACE2 variant does this by binding to SARS-COV-2 and preventing it from binding to regular ACE2 (which is necessary to get into the cell).

Batlle has spent over 15 years researching enzymes such as ACE2 and their potential therapeutic uses. His startup was launched with the help of the Northwestern Innovation and New Ventures (INVO) department, which supports inventors in commercializing their discoveries.

“The pandemic has definitely slowed us down,” said Batlle. “During the first few months [of the pandemic], we were restricted in how many experiments we could conduct in the lab and the people we could connect with. There was also difficulty in communicating with potential partners in person. On the other hand, we also had a lot of interest because of people who had read about our proteins and how they could be used to treat COVID.” Batlle said that one aspect of the company’s growth was accelerated with using its ACE II variants to treat COVID-19, while another aspect has declined with less progress in their work for treating kidney disease.

In terms of running an online business, the interest in their business increased, but their ability to complete any transactions was compromised. While face-to-face meetings were not possible, Zoom was crucial when speaking with business partners and presenting to pharmaceutical companies.

Batlle’s team also remained resilient and continued to work hard in commercializing their product. Their determination superseded challenges such as a lack of productivity, which other businesses have commonly been facing. This lack of productivity has stemmed from a disruption to daily schedules and anxiety over the looming health crisis.

Both SIA and Angiotensin Therapeutics have a plan of working with larger players in the industry to help bring their products to a broader market. According to both founders, the pandemic did not significantly derail these plans.

Liliana De Souza, a senior at Northwestern, president of EPIC, and mentor at the Garage, also weighed in on the effects of the pandemic on startups. The Garage is a well-known startup center on campus that provides student entrepreneurs with the physical space, network, and resources to grow their ideas and businesses.

“Before the pandemic, the Garage served as a space for the entrepreneurs to meet and learn from each other. When the pandemic occurred, this space had to be moved online,” De Souza said. “There has been an increased emphasis on Slack, and there are new initiatives that involve connecting people. The organization has done a great job, and there have been virtual pitch competitions and virtual accelerators.”

She stated that the pandemic has been hard on startups since it has impacted sales volume. “I have been helping a startup called QADE, which has had to find customers during the pandemic. This has been very hard and people have had to be more creative in finding outlets to reach customers. The startups at the Garage have also been impacted by not having everyone in one place to take advantage of the resources.”

Despite a tough year, De Souza is optimistic for the future as the Garage will reopen its services and recruit again in the fall.

“The value proposition of the Garage is being in the same physical space to share ideas, support, and mentorship. Not having this space makes building your startup ten times more difficult because you are alone and without a community.”

Bizi, a startup associated with the Garage, was born during the pandemic. Bizi’s founders Alicia Lee, Benjamin Gross, and Martha Castro met in an entrepreneurship class last Spring and had an idea for a company that would allow consumers to shop consciously and find local shops and e-retailers that align with their values.

“Our startup was born during the time of the pandemic. Even though it [the pandemic] caused a lot of problems for businesses, it also created opportunities for people to create new things to solve the problems that emerged. We pinpointed a problem that small businesses were struggling to connect with audiences because of a lack of business acumen and organization” said Castro.

Bizi’s founders built on this idea to help form the startup and were also able to benefit from grants given by the Garage and the Northwestern student government. They participated in various university startup challenges that occurred due to the pandemic. Overall, they found the Northwestern community to be very helpful.

“COVID shined a spotlight on these problems that were already existing, Gross said. “Periods of disruption create a lot of opportunities for innovation. This is the time when new ideas have a chance at becoming real.”

Lee mentioned that the Garage was very helpful in helping the business grow in its early stages. “Although we couldn’t use the physical space, the mentorship we received from weekly meetings has been instrumental in developing our technology.”

Although there were many positives, Castro still recounted the difficulties the team had as a result of the pandemic. She stated that it was really challenging to not meet with businesses for such a long time. The coordination in scheduling Zoom calls and getting people to respond to their surveys was also difficult.

“If the pandemic has taught us one thing, it is that you have to adapt to be able to thrive,” Castro said.