Navigating the Startup World in the Midst of a Pandemic
The COVID-19 pandemic is still evolving, yet it’s impact on startups is already evident. Vulnerable by nature, startups are navigating challenging and uncharted territories without a safety net of excess cash on hand. However, they are also privy to unique opportunities.
Two key themes are emerging:
1. Finding early stage investment will likely be more difficult (for many industries)
2. Agile startups can more quickly adapt to these changing times than their larger counterparts
Here we’ll explore how COVID-19 is affecting startups globally and reasons to remain hopeful.
Investment Uncertainty
The coronavirus has already had a devastating impact on the global community, affecting hundreds of thousands of people and leaving our economy reeling. Coming off an 11-year bull market, 2020 was anticipated to be another year of growth. With the onslaught of COVID-19, stocks plummeted, leaving the economic forecast bleak and volatile.
According to a survey conducted by 500 Startups, a global venture capital firm headquartered in Silicon Valley, responses suggest the current health crisis will have a negative (32%) or somewhat negative (36%) impact on the early-stage investment climate, lasting 1–2 years.
However, the survey also identified sectors where investor interest is increasing, including healthcare, remote work solutions, and logistics and productivity software. This provides helpful guidance on where startups may look to shift or enhance their offerings.
Startup Adaptability
Despite the major disruptions that COVID-19 has brought to the startup ecosystem, their inherent adaptability has enabled many startups to pivot quickly to relief efforts. Crunchbase has compiled a running list of startups around the world who are doing what they can to give back to their communities.
Examples of companies that are proactively — and successfully — using their services for good in these trying times include:
— Silicon Slopes in Utah — helping the State of Utah double their testing capacity.
— EdTech startup Juni Learning — actively hiring hundreds of university students as instructors for its online learning platform for kids.
Startup Specific Resources
In light of the rapidly changing landscape, there are a number of resources which have been developed to assist startups in this time.
Startup Genome, a research and policy advisory organization committed to accelerating the success of the startup ecosystem, has launched the COVID-19 and Startup Ecosystems Series to help founders and policymakers weather the storm. In its first installment, The Impact of COVID-19 on Global Startup Ecosystems, they look at what we can learn from the Chinese experience at ground zero of the crisis, parallels we can draw from past recessions, [bk1] and discuss reasons for optimism.
Key takeaways, as outlined in the report, touch on difficult scenarios (including the potential for $28 billion in startup investment to go missing in 2020), but also allude to the power and resiliency of startups. Notably, over half of the Fortune 500 companies were created during a recession including over 50 tech unicorns, collectively valued at $145,2 billion, were founded during the 2007–2009 recession years. This includes Airbnb, which was born out of necessity as its founders could not afford to pay rent at the time.
Startup Genome has also created COVID-19 Crisis: Global Knowledge Base for Startup Ecosystem Actors for policy makers and startups, which compiles useful ways to mitigate or resolve COVID-19 induced challenges. This living document offers curated policy solutions to address real-time problems and ideate on practical solutions, including how startups can be utilized to help directly with the crisis and how to best preserve startup talent. They are also tracking policy solutions globally through their solutions database.
The impact of COVID-19 has barely surfaced, but we remain hopeful that despite the impending economic consequences, the potential for new opportunities within the startup community persists. We will continue to follow related stories and share important learnings on how COVID-19 is affecting the startup environment.
