MANILA, PHILIPPINES – With COVID-19 shaking the global economy in huge proportions and affecting small businesses and startups like nothing before, Startup Genome released the first installment in its COVID-19 and Startup Ecosystems Series to better understand this crisis’ impact on those ecosystems.
The key findings in this first report are:
- Chinese Venture Capital (VC) deals have contracted between 50 and 57 percentage points since the onset of the crisis this year, relative to the rest of the world. If a drop like that happens globally, approximately $28 billion in startup investment will go missing in 2020, with a dramatic impact on companies.
- If the drop in investments continues beyond two months and the COVID-19 shocks trigger an economic contraction, look to the 2000-2001 and 2007-2009 recessions as historical analogies for the current moment.
- Crisis begets opportunity. During the past two recessions, fewer dollars were invested but more companies got funded. Businesses that become cash efficient might become even more likely to raise money following a recession. Over half of Fortune 500 companies were created during a recession, including Airbnb, created because the entrepreneurs behind it could not afford to pay rent at the time.
- New and young firms are the main net job creators in the economy, especially true during recessions. Recently, the U.S. saw unemployment insurance requests hit 3.3 million people in a single week: the highest number recorded since 1967. The need for net new jobs means the economy needs startups now even more than usual.
- Governments in many places around the world are helping founders through these difficult times. Denmark is covering 75% of salaries for companies that do not cut staff, while Germany is offering to cover 60% of the new salaries for employees reduced from full to part-time.
For all of the bleak economic prospects worldwide, there may indeed be opportunities for startups to find funding and even thrive despite this pandemic.
Read the full report at https://startupgenome.com/blog/impact-of-covid19-on-global-startup-ecosystems
About the Author:
Jason Inocencio was once the Digital Editor of adobo magazine who still loves seeing great campaigns from all over the world. He proudly shows off his love for all kinds of geeky things, whether it be movies, TV shows, comics, sports, or trivia.
