Even though the global startup economy remains large, generating nearly $3 trillion in value, it is being battered by the Covid-19 crisis. Even before the pandemic erupted, the situation was far from ideal with inclusion remaining a fundamental challenge, value generation concentrated in a handful of cities and tech giants such as WeWork and Softbank faltering. The unexpected arrival of the coronavirus has now resulted in startups experiencing a drop in consumer demand and VC investment that have resulted in a wave of layoffs. That’s according to the latest Global Startup Ecosystem Report from Startup Genome which states that the Covid-19 crisis could prove a “mass extinction event” for startups.
In the first three months of the year, VC funding plunged 20% globally and 50% in China. Demand has also dropped like a rock for most new companies and the report states that 72% of startups saw their revenue decline since the start of the crisis while the average startup experienced a revenue decline of 32%. Worryingly, 40% of startups saw their revenue fall by 40% or more while only 12% experienced significant growth. Asia has suffered the worst impact of any continent with startup revenue contracting 39% since the start of the crisis, followed by Africa’s 36% drop. Likewise, South America saw revenue fall 32%, North America’s decline was 31%, while Europe and Oceania contracted by 27% and 25%, respectively.
The following infographic provides an overview of some of the global startup sectors worst impacted in the report. Given that going on holiday remains either a major risk or forbidden across much of the world, it comes as little surprise that Travel & Tourism has suffered the greatest decline in revenue, falling 70% since the start of the crisis. As demand for new cars evaporated, the automotive sector also experienced a major slump in revenue and it suffered a 43% decline. The tech sector has weathered the storm better and although it too suffered a noticeable financial impact, it was nowhere near as severe. For example, Social Media & Messaging startups saw their revenue fall 22%, Gaming contracted by 19% and Blockchain & Crypto declined 14%.
- From Forbes Online