How COVID-19 is Affecting Startups

How COVID-19 is Affecting Startups

Startup Genome, the consultancy firm, has published a survey. It analysed how COVID-19 is affecting startups. The results are worrying, and should draw the attention of policymakers.

A recent study, on Corona’s impact on startups, has been published. The authors are Startup Genome, the San Francisco consultancy firm. They surveyed about 1070 respondents, across 50 countries. Also, responding enterprises belonged to different fields. AI, Edtech, or Digital Health are examples. The survey had an extra concern: it covered different stages of lifecycles.

The survey came at an important moment. Corona virus has had a major economic impact. In such context, it is normal that the situation of startups should be worrying. Since they’re small, it’s harder for them to survive. Governments have seemed to notice this, too. There has been an increase in economic stimulus, focusing on entrepreneurs. Yet, it’s not clear if it will be enough.

A footnote should be made, on how COVID-19 is affecting startups. The crisis isn’t clearly destroying all business. Some entrepreneurs have actually flourished in its midst. Think about online meeting apps, or digital health. Yet, these are “niche” businesses. The overall picture of entrepreneurship, seems darker.

What insights did the authors have? Several, concerning different topics. An example regards capital. Here, the situation isn’t bright. About 41% of startups only have cash runway for three months or less.

Another issue assessed is the market. 74% of beginner enterprises saw their revenue decline. Of these, a subset was critically hit. 16% had drops of revenue of more than 80%. Of course, some companies saw a slight growth. Yet, this percentage amounted only to 12%.

A final topic which was investigated was jobs. With the crisis, 74% of startups have had to cut on full-time workers. Also, 26% had to fire 60% of their employees or more.

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