Venture News
Startup Genome: Capital shrinks, employees let go during Covid-19 pandemic
Nearly three of every four startups globally — 74 percent — have had to terminate employees since the beginning of the Covid-19 coronavirus crisis.
That’s one of the key findings of a new report by Startup Genome, a research and policy advisory organization that has been tracking the impact of the pandemic on young companies around the world.
Related: Covid-19 and startups
In a report issued April 21, Startup Genome focused on five areas: talent, capital, operations and management, market and policy.
Talent
The survey found about 40 percent of all startups had to lay off 20 percent or more of their staff.
In North America, 84 percent of startups have had to reduce headcount, with 67 percent of the startups in Europe and 59 percent of startups in Asia letting go of workers.
Capital
More than four in every 10 startups, or 41 percent, are in danger of slipping into the “red zone,” with three months or less of runway, and 10 percent of the startups have one month or less of runway.
Term sheets that were in process before the crisis hit have also been impacted.
Operations and management
Over two-thirds of startups have reduced their expenses since December 2019, with most making relatively small cuts.
Still, 1 of every 10 companies have cut costs by over 60 percent.
“Nonetheless, tech startups are uniquely situated to continue operating even in lockdown scenarios. Unlike many traditional businesses, 96 percent of startups responded that they have continued working during the crisis, even if there is significant disruption,” the report said.
Market
About three of every four startups, or 74 percent, have seen revenue drop since the beginning of the crisis, but 12 percent of startups are experiencing growth.
Business-to-consumer startups are about three times more likely to be in industries experiencing growth in the face of the Covid-19 crisis when compared to business-to-business startups, Startup Genome said. Startups serving large enterprise clients are twice as likely to be in industries adversely affected by the crisis as B2C startups, and are the least likely to be experiencing an increase in sales, according to the report.
Policy
About 38 percent of startups are not helped and do not expect to be helped by policy relief measures related to the crisis, while 16 percent are not currently helped but expect to be helped by a policy measure soon. The remaining 46 percent of startups are currently being helped, the report said.
The most helpful policies are:
- Grants to preserve company liquidity (29 percent)
- Instruments to boost investment (18 percent)
- Support to protect employees, like payroll supplementation grants (17 percent)
- Loans to preserve company liquidity (12 percent)
Startup Genome said 1,070 respondents answered the survey, across every continent and in over 50 countries, between March 25 and April 17.
If you are a startup and want to take the survey to share what is happening in your business and market, you can take it here.
The complete report from Startup Genome is here.
