MANILA, PHILIPPINES — In order to better understand the impact of the global pandemic on startup ecosystems and to help policymakers survive, research and policy advisory organization Startup Genome launched the “COVID-19 and Startup Ecosystems Series,” as well as a Global Policy Database for governments to learn from each other’s initiatives.
According to the report, global venture capital funding has dropped by about 20 percent since the onset of the crisis in December 2019. The drop, however, is far from evenly distributed.
Four out of every 10 startups global are in the “red zone,” the report also said, with three months or less of cash runway. This means that if these companies do not change their cash flow situation and don’t raise additional funds they’ll die.
It also found that China, the first country hit by the coronavirus crisis, had a drop of over 50 percent in funding relative to the rest of the world in January and February. Though it has seen a rebound in March, numbers are still lower than pre-crisis levels.
Asian ecosystems (excluding China) also saw a major drop beginning in January, with no rebound as of March.
The United States has so far experienced only relatively small changes in startup funding since December: a drop of less than 10 percent by March. However, the small drop between December and the beginning of the year means that every month of the first quarter of 2020 in the U.S. saw over 15 percent fewer deals than the same months in 2019.
European ecosystems only saw drops in funding activity starting in March, of about 10 percent compared to December — the last continent among all regions of the world to see an impacton number tech investment deals.
However, startups will likely be key to economic recovery as they create most of the net new jobs in the economy, and are especially more relevant now as our society becomes increasingly digital.
Governments need to act now to support these companies so that their digital innovation and economic recovery capabilities aren’t decimated.
Read the full report on Startup Genome
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.
