The onset and the rapid spread of COVID-19 has rampaged through the business world. Many companies are already shutting down, while many are on life support. If the situation lasts for a few more weeks, the implications will be unprecedented.
Given the situation, it is important to learn how businesses have been affected and in which areas.
US-based Startup Genome, which offers research on the startup ecosystem, has gathered data from entrepreneurs to learn about the impact on their businesses in areas such as capital, jobs, and policy.
Here, the goal is to put the results against policy action to “save startups and provide data-driven arguments for more government action around the world”.
Here’s how these three areas have been affected:
Capital
Funding is one significant aspect that has affected many startups during this period. This is because startups in normal conditions can be different during a calamity and extremely different in case of a pandemic.
Many investors, who had promised to fund startups, are putting deals on hold while others are seeming to have a change of mind.
According to the survey, four out of every 10 startups will die in the coming three months if they do not manage to raise additional capital for their business and if their expenses and revenues remain stagnant.
Even though 25 per cent of startups sailed through the storm and have managed to receive funds from investors without many hurdles, more than half (about 55 per cent) have experienced a slower process since the onset of the virus.
The rest of the 20 per cent of startups have unfortunately had their term-sheet cancelled.
Hiring and retaining
As revenues slow down, decision makers in companies are facing the tough decision of laying off people while others are implementing different measures like pay cuts, salary freeze, etc.
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The survey has reported that 58 per cent of startups have had to terminate full-time employees, with North America being the country to lay off the highest number of employees (70 per cent), followed by Europe (55 per cent), and Asia (36 per cent).
Policy
Even as a myriad of influential companies are doing their best by offering support to local businesses, more than 90 per cent of startups are still looking for help from national governments, while 29 per cent of firms are receiving support from city and state governments.
Startups have shared that the top-4 most helpful policy responses for their businesses would be: grants to preserve company liquidity (30 per cent), instruments to boost investment (19 per cent), support to protect employees such as payroll supplementation grants (15 per cent), and loans to preserve company liquidity (12 per cent).
In conclusion, while the numbers are not encouraging, business leaders are being urged to remain positive during the crisis and help each other to sail through the thunderstorm.
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