Industry, Logistics & Shipping

Impact of COVID-19 on Global Startup Ecosystems

Global venture capital funding has dropped by 20% since the onset of the crisis in December 2019, says a study. The drop, however, is far from evenly distributed.
 
China, the first country hit by the coronavirus crisis, had a drop of over 50 % in funding relatively to the rest of the world in January and February. Nonetheless, China has seen a rebound in March, although with numbers still lower than pre-crisis levels, says the Startup Genome study. 
 
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 % by March. However, when we take into account the seasonality pattern from previous years, with January consistently showing more activity than December, the small drop between December and the beginning of the year means that every month of the first quarter of 2020 in the US saw over 15% fewer deals than the same months in 2019.
 
European ecosystems only saw drops in funding activity starting in March — the last continent to see a pronounced impact on tech deals.
 
4 out of every 10 startups globally are in what we call “red zone” — they have 3 months or fewer of cash runway. 
 
For startups that have raised Series A or later rounds, 34% have less than 6 months worth of cash — a danger zone in the current situation where fundraising is difficult.
 
The double whammy of the drop in demand (3 out of every 4 startups have had their revenue decline) with the capital crunch startups are in makes this global drop in venture capital particularly worrisome.
 
Startups will be key to the economic recovery: they create most of the net new jobs in the economy, and are especially more relevant now as our society becomes increasingly digital. -- Tradearabia News Service