Impact of Covid-19 crisis to the Global Startup Ecosystem

April 15, 2020

Co-Authors  – JF Gauthier, Founder & CEO of Startup Genome and Arnobio Morelix, Chief Innovation Officer

Get global startup insights from the front lines: sign up for public and private sector analysis at Startup Genome

We have taken part of a Global Survey created by the Startup Genome Project on the impact of the recent crisis on the startup ecosystem and are sharing the results here:

42 percent of startups globally are threatened in what we call “red zone”: they have 3 months or fewer of runway. This means that if their expenses and revenues remain as they are now and they do not raise additional capital, 4 out of every 10 startups will die in the next 3 months. This number is up from 31 percent in December 2019!

 

To better understand the impact of the COVID-19 crisis on startups globally and equip governments with tools and actionable insights to support their innovation ecosystems, Startup Genome launched the first-ever global startup survey on the topic.

This continues our broader initiatives on the impact of COVID-19 on global startup ecosystems, like Global Policy Knowledge Base and our ongoing Research Series.

Key findings from this initial analysis are:

Capital

  • 42 percent of startups globally are threatened in what we call “red zone” they have 3 months or fewer of runway. This means that if their expenses and revenues remain as they are now and they do not raise additional capital, 4 out of every 10 startups will die in the next 3 months. This number is up from 31 percent in December 2019.
  • Of startups that had a term sheet before the onset of the crisis, 20 percent have had the term sheet cancelled by the investor, and 55 percent have had the process slow down significantly. Only 25 percent have had the process continue on normally or have gotten the funds.

 

Talent and Jobs

  • 58 percent of startups have had to terminate full-time employees since the beginning of the crisis. When we break down that share by the top three continents for startup activity, North America is the place where most startups have had to terminate employees (70 percent), followed by Europe (55 percent) and Asia (36 percent).

 

Market

  • 71 percent of startups are operating in industries negatively affected by the crisis. 15 percent of startups are in industries unaffected so far, and 10 percent of startups are in industries experiencing growth.

 

Policy

 

  • 43 percent of startups are not helped and do not expect to be helped by relief policy measures related to the crisis, while 19 percent are not currently helped but expect to be helped by a policy measure soon. The remaining startups are currently being helped.
  • 94 percent of those startups being helped currently or expecting policy help soon are looking for support from national governments. 29 percent are also being supported by city and state governments.
  • According to founders and startup executives, the top four most helpful policy responses for their businesses would be, in order: #1 Grants to preserve company liquidity (30 percent), #2 Instruments to boost investment (19 percent), #3 Support to protect employees, like payroll supplementation grants (15 percent), and #4 Loans to preserve company liquidity (12 percent).

 

In the coming weeks and months Startup Genome will continue publishing insights on the impact of the coronavirus crisis on startups, and building tools for governments and ecosystems to support their startups through the crisis. You can sign up here to get it.

If you are a policymaker or ecosystem support organization and would like to deploy the COVID-19 Impact Global Startup Survey in your community and get detailed insights about what is happening on the ground (and how your ecosystem stack up with what is happening globally), please reach out to Adam Bregu (adam@startupgenome.com).

If you are a startup and want to take the survey to share what is happening in your business and market, you can take it here. Your input is crucial.

 

Get global startup insights from the front lines: sign up for public and private sector analysis at Startup Genome

 

HT