The world economy has been adversely affected by the Covid-19 pandemic. Coronavirus forced layoffs, business closures and bankruptcies, along with government bailouts. Startup businesses of different types have also been affected by the global pandemic. With increased distribution of the vaccine and numbers of cases on the decline, there’s light on the horizon that things will improve. Also encouraging is recent research, suggesting most startups have been unaffected or have recently started to see a positive business impact during Covid. Many startups have been able to pivot their business model, leverage their strengths and make a positive impact on their communities.
Recent Research Highlights Success of Startups as Pandemic Progresses
During the first three months of 2020, many reports pointed to a 40-70% decline in revenue for startups worldwide. Despite an initial downturn, many startups have begun to report positive results as the situation evolves. In September of 2020 Quartz.com referenced a working paper released from researchers at Harvard, the University of Chicago, Stanford and the University of British Columbia. The research surveyed nearly 1,000 venture capitalists-572 in the United States and 381 in other countries, asking them to rate the health of the startups in their investment portfolios. The survey found that:
“52% of startups have been positively impacted by the pandemic or have seen no impact to speak of.” (1)
While 52% is by no means an overwhelming majority, and some startups have declined or permanently closed, in general startups have fared well compared to other businesses. In fact, John Haltiwanger, an economist at the University of Maryland, working with the U.S. Census Bureau, reported that Covid-19 started a “startup boom.” Haltiwanger reported that six weeks into the pandemic the rate of new business applications was incredible, “The third quarter of 2020 is the highest quarter of applications we’ve ever seen.” (2)
Technology Focus Contributes to Startup Success During Covid
One reason why startups have continued to thrive despite the pandemic, is due to their use of, and focus on, technology. Coronavirus has forced people to remain in their homes, and shift to a remote model for work and school. Startup businesses that facilitate those processes or those that make “life at home” more tolerable, have obviously accelerated. Forbes.com reported on a table posted by Asheem Chandna at Greylock (3):
The list below shows the industries where startups have not only survived through the first few months of the pandemic but have thrived.
- Ecommerce
- Media and Gaming
- Video Conferencing
- Public Cloud
- SaaS
- Collaboration Software
- Cybersecurity
- Health Tech
Coronavirus accelerated the transition to the public cloud, subscription based centrally hosted software or SaaS, and collaboration software. During the pandemic patients have attended tele-health visits with doctors for any non-emergency related health issues, causing a fast progression in health care tech that will most likely continue, even after the global pandemic has passed. Similarly, remote meetings utilizing video conferencing, are experiencing unparalleled usage and cybersecurity for people tele-working has become vital. Unable to travel, people are turning more to media and gaming for entertainment. With capacity limits in place at shopping centers, grocery stores, and other public retail areas, ecommerce has become a part of everyday life.
Advantages and Opportunities for Startups During Pandemic
Coronavirus has transformed how businesses worldwide operate and startups are no exception. An advantage Startups have over other businesses seems to be an increased willingness and ability to pivot their business model to the present situation. Startups reporting success throughout the pandemic, have been those focused on the need to innovate and diversify their business practices and operations. Startups have shown great adaptability throughout Covid. For example, 3D printing companies using their technology to produce PPE and respirators, and an AI Insights company deploying AI to support frontline workers. (4)
Startup businesses seem to realize the potential that exists during times of crisis. Periods of crisis may be challenging but they can also bring new opportunities for entrepreneurs. VoxEU.org points to opportunities for start-ups to “introduce radical innovations that can be useful in the short run. Today, that could mean innovations in tele-medicine, remote personal care, medical equipment, home delivery, food processing, teleworking, online education, and contact tracing.” Secondly, VoxEU references the changes in consumer behavior and needs, as well as societal changes that the Covid-19 outbreak may introduce. These changes can translate to business opportunities for the startups that are able to anticipate them. (5)
Preparing for the Future
The current world health crisis has brought about unprecedented challenges and shown the true resilience of Startup businesses. Young businesses reporting success amidst the pandemic, are the ones that have adapted quickly by pivoting their business model, leveraging their capabilities and becoming more innovative. As a result, startups are playing an even more critical role in the world economy that is sure to continue post-Covid.
McSweeney & Ricci is Here to Guide Your Business
McSweeney & Ricci understands the impact the current health crisis may be having on your startup business. We are here to help answer any questions you may have and to guide your business with the advice you can trust. With over fifty years of experience protecting businesses of all sizes, from seed stage to exit strategy, we provide customized business insurance suited to your budget. Every business, no matter what stage, is exposed to risk and should be protected by the proper levels of insurance protection. Our varied company selection allows us to offer your tech startup business flexible coverage options at competitive prices. We partner with you to grow your business for the long term. For more information on business insurance for your technology startup contact the startup insurance specialists at McSweeney & Ricci by calling 844-501-1360, connect with us via email or submit for a complimentary insurance quote here on our website.
Sources:
- Quartz.com “Most Startups Haven’t Seen Any Negative Impact from the Pandemic” by Nicolas Rivero-Tech Reporter 09/22/20
- www.npr.org “The Unexpected Boom In Startups” by Greg Rosalsky 11/10/20
- Forbes.com “Covid-19’s Impact on Startups: Assessing the First Few Months” by Asheem Chandna-Contributor 07/22/20
- www.weforum.org “What Covid-19 Taught Ten Startups about Pivoting, Problem Solving and Tackling the Unknown” by Tooba Durraze-Growth Strategies Lead, & Olivia Zeydler-Member of the Acceleration Team 07/20/20
- Voxeu.org “Start-ups in the time of COVID-19: Facing the challenges, seizing the opportunities” by Flavio Calvino, Chiara Criscuolo, Rudy Verlhac 06/23/20
