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How the COVID-19 pandemic is starving tech startups worldwide


Silicon Valley and other centers of tech startups may have seemed immune from the COVID-19 pandemic, as software developers, marketers, and others already used to working digitally shifted to largely working at home as lockdowns became mandated throughout much of the world a month ago.

But a new survey of the tech startup sector across the globe shows that a high percentage of the industry is poised to starve and go out of business over the coming months as the capital and revenues that sustain them dry up. Startup Genome, a U.S.-based global policy advisory company to tech startups (and governments seeking to support tech startups), surveyed 1,070 startups across 50 countries in March 2020.

On the surface, startups’ operations seem little affected

The pandemic has had a fairly limited effect on tech startups’ operations due to the ability for many employees to work at home, the Startup Genome survey shows.

lockdown operatiional effects - tech startups due to COVID-19 Startup Genome

But in looking a startups’ finances and market conditions, the survey paints a dire picture. Not only are investors pulling back funds — and even canceling the term sheets that represent funding commitments — but whole segments targeted by startups are in serious trouble, meaning the potential market for tech innovations beyond the short term is also at risk.

Enterprise-oriented startups suffer more

The target markets for tech startups have been affected differently by the COVID-19 pandemic, though all have been affected significantly. On a percentage basis, fewer large enterprises have closed due to the pandemic than in other segments. But a higher percentage of enterprises (66%) have been affected significantly — retailers, logistics providers, agriculture and food processors, commercial real estate firms, manufacturers, and medical providers have all had their businesses upended even as they remain in business to some degree. A smaller percentage (10%) of enterprises have been unaffected.

That difference in impact on enterprise-focused startups is reflected in startup revenues. For the 26% of tech startups that have seen revenues rise since the pandemic, consumer-oriented firms are three times more likely to see growth due to the pandemic than enterprise-focused startups. And tech startups focused on larger enterprises versus those focused on small businesses and medium enterprises are struggling the most to get revenue.

Copyright © 2020 IDG Communications, Inc.

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