Covid-19 has accelerated digitalisation for companies across the globe, forcing many to adapt to a remote workspace during periods of lockdown. Therefore it makes sense that certain sectors and businesses, whose remote teams are working across time zones, have fared much better than their traditional counterparts. Consumer priorities have shifted, along with the way we interact with the world. As a result, global supply chains have slowed down, while the use of virtual services has increased exponentially.
The economic effect of Covid-19 hit traditional sectors the hardest. Brick-and-mortar stores have shuttered, restaurants have turned into food delivery hubs, and airlines have gone bankrupt. As we shift towards more permanent remote work and online consumption, agile startups that have been able to adjust to these trends can thrive and investors should encourage these types of companies in their portfolios.
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Economic crises breed winners and losers, and 2020 has expanded the gap between both. As the Covid-19 pandemic is one of the world’s largest economic crises ever, digitalisation efforts have also amplified. For example, tech companies that cater to remote needs, such as e-commerce, video conferencing software, and delivery, have grown significantly over the past year. As a testament to this, Zoom’s market valuation exceeded Exxon Mobil’s US $138 billion price tag at the end of October 2020.
Many innovative companies became competitive because of their flexible working arrangements and high level of digitisation. Moreover, rather than traditional office hierarchies, they operate via project-based teams of individuals located in various time zones. This may be unusual for private equity companies to embody, but in setting the example for their portfolio companies, they might also find efficiencies in modernization.
Globalization 4.0
The Covid-19 pandemic has a silver lining; it normalised location-independent forms of work to allow employees to log in and get to work, wherever they are based. In other words, it is the perfect moment to build a global team. Hiring across borders presents an opportunity to bridge gaps in the market by connecting professionals with specific skill sets to the consumers who demand their service or product. Even without physical travel, globalization will continue through international networks formed by apps like Slack, Notion, and Microsoft Teams, which increasingly define the virtual workspace.
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Dropbox announced it was going virtual-first in early October and has since wholly embraced this new model as the future of work. Remote work has become the primary experience for all Dropbox employees, along with non-linear workdays where collaboration hours overlap between time zones instead of following the standard 9 am-5 pm workday schedule.
Exemplified by Dropbox and many innovative brands, the pandemic spurred a new kind of globalization that is not based on the flow of goods across borders, but on the flow of data. Going global will help VCs and PE firms adopt a more hands-on approach to running their portfolio companies — ultimately increasing the likelihood that their investments will prove successful in a post-Covid environment.
New tools, new normal
A passive approach to managing portfolios remotely limits portfolio companies’ opportunity to capitalise on the investing fund’s expertise. Thankfully, a new set of tools has made it easier for PE firms and VCs to adopt a more hands-on approach.
The normalisation of virtual conferencing means that firms can more easily bridge the gap between their portfolio companies and compliant, trusted partners in their network. As advisors with a collective wealth of experience in scaling companies, increased investor involvement at a strategic level tends to benefit portfolio companies and videoconference software has made collaboration easier than ever.
Another tool available to investors is a partnership with a global Employer of Record (EOR), which brings a geographically dispersed talent pool under one single, locally compliant payroll. By teaming up with an EOR like Globalization Partners, investors can remove the administrative burdens associated with hiring, onboarding, and payroll from their portfolio company’s shoulders and let them focus on growing their business. Thanks to its proprietary cloud-based solution coupled with the company’s unmatched legal and tax expertise, Globalization Partners facilitates global hiring, and provides technology to help the employer efficiently manage their global workforce.
Saving costs while going global
Firms pursuing international M&A transactions traditionally face a unique blend of challenges. Sellers may face setbacks during cross-border employee transfers due to the complexities of international regulations, while buyers face legal issues like benefits matching and disbursing salaries through foreign banks. Resolving these issues can be a drain on financial resources and time.
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While firms might use mergers and acquisitions to expand globally, or tap into international talent, doing so without a trusted partner can result in value loss and delays to deal close. With the help of Globalization Partners, startups and investors can navigate employee transfers, onboarding, and offboarding seamlessly and compliantly.
Prepare for Economic Recovery
According to a McKinsey global survey, over 50 per cent of respondents in China, India, North America, and the Asia-Pacific region hold an optimistic economic outlook for economic recovery.
Forward-thinking companies are planning now to take advantage of new global opportunities, however, it can take months or years to expand globally by setting up a local branch or entity, which can prevent portfolio companies from creating value for their investors. Globalization Partners enables companies to grow on a global scale and build international teams in a matter of days or weeks — well in time to catch the recovery wave into a more interconnected future.
Learn more about Globalization Partners.
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This article is produced by the e27 team, sponsored by Globalization Partners
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