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Covid-19 Impact: Premature death of start-ups

The Covid-19 pandemic has caused uncertainty in the start-up ecosystem. It has disrupted operations of several, and postponed incorporation of many or killed many even before they were born.

The Silicon Valley in the United States maintains the number 1 position when it comes to global start-up ecosystem hubs and funding. It has an ecosystem value of a whopping $677 billion.

According to the global start up ecosystem report Covid-19 could lead to a “mass start-up extinction event”.




Even before the pandemic struck in 2019-2020, start-ups were facing a lot of fundamental challenges and once Covid-19 hit things went south.

During the first three months of 2020 venture capital funding fell by 20% globally. Nearly 72% of the start-ups saw decreasing revenue trends in the early stages of the pandemic. Only about 12 % of the start-ups around the globe showed significant growth.

Many start-ups had pretty much three options to choose from:



A) Cut costs by laying off staff, salary cuts, hiring interns (but this could lead to severe fall in quality)

B) Shut down operations to avoid further losses or sell their businesses. Sale could also mean having to agree to sell at undervalued figures than market value.

C) Ensure all resources have been directed to transform the business for it to survive and thrive in a post Covid-19 era (this could even mean diversification or a complete change in line of business)

SECTOR WISE IMPACT

According to Statup Genome the worst impacted start-up sectors are:

•Travel and tourism showed a 70% fall in income
•Fashion and beauty industry saw revenue contract to 59%.
•Automotive sector reported a 43% decline in revenue
•Big data and AI sector saw revenue dip by 30%
•Messaging and social media reported plunge of 22% in revenue
•Gaming sector fell by 19%
•Blockchain and crypto mining saw revenue fall of 14%