Startup challenges in covid-19 pandemic

• Startup challenges in covid-19 pandemic

COVID-19 has presented great economic challenges for countries around the world. The pandemic's start was characterized by deep uncertainty, and governments decided to quarantine cities to reduce the risk of contagion. Now countries have more epidemiological and economic data available, and for this reason, they are trying to manage a progressive economic opening.

• Understand the situation

If the impact seems inevitable, it is still possible to prepare for this crisis and even get through it. Before taking concrete actions, it is important to take the time to analyze the situation, understand the issues, and then find possible alternative solutions.

Analyze the issues specific to your business because the context is different from one business sector to another. Take a tour of the challenges that come your way. Think about your sources of supply that will be disrupted or even completely blocked. You may also have difficulty meeting your usual sales targets, and as a result, you may run out of cash to pay for your fixed charges like rent, payments on your loans, taxes, payment to your suppliers, or again the wages of your employees.

• Economic shock

According to the International Monetary Fund (IMF), the economy received a shock when several factors were declared a pandemic. First, the quarantine and social distancing forced certain sectors (such as tourism, hotels, entertainment) to close completely. Other sectors closed temporarily, but this disrupted supply chains and lowered global productivity. Also, the fear of contagion, the decrease in wages and layoffs, led to a reduction in consumption, which led to more layoffs and businesses closing. Finally, health expenditures rose more than planned.

These are tough times for startups. As the Covid-19 crisis continues to spread across Europe and the United States, companies scramble to mobilize responses.

There are no simple answers due to the unpredictability of the disease's dynamics, the lack of relevant previous experience, and the absence of plug-and-play instructions from governmental or international authorities.

Despite the institutions' efforts, aimed at increasingly implementing the measures envisaged to protect Startups, the prospects of guaranteeing the financing of investors in startups remain bleak over the next 6-12 months.

• Venture Capital and the crisis 

The venture capital fund managers involved in the survey have experienced liquidity problems, and 54% are preparing to seek new financing to restart. The main problems for investors connected to the Covid-19 health emergency are related, in addition to liquidity problems, to a decrease in fundraising or the failure of one or more startups within its portfolio. Finally, 20% of VC funds said that startups in their portfolios experienced an increase in demand of more than 50%, compared with 53% that had to contend with a decrease of less than 50%.      

• The changes to restart

Both the startups and the VC funds ask for government intervention through direct and indirect subsidies and a bureaucracy reduction. In particular, investments are hoped for to enhance infrastructural equipment, with particular attention to digital. A redefinition of labor legislation (focusing on smart working) and direct and indirect subsidies (e.g., discounts on bills, tax reliefs). 62% believe that the appropriate tool is that of legislative decrees, 15% instead ask for greater credit granting by banks, and 23% see a possible solution in the search for new private investors.

• What does it mean to sail with the wind against

The resilience shown by startups in dealing with this emergency and the gap that has emerged with the traditional business system brings out the need to put them at the recovery project center.

Artical credit: www.gatitaa.com