Startups in Covid Times

Start-ups play a significant role in the economic environment. They create employment, they innovate, and since the number of start-ups is increasing, they create more healthy competition. But, what impact does COVID-19 have on these small businesses? Some are flexible and are able to adapt quickly to the new situation. On the other hand, various start-ups are having many difficulties. In this blog article, it will be discussed what the challenges of the COVID-19 crisis are for start-ups, but also the many opportunities that arise during this time.

Opportunities

During past recessions, a lot of start-ups were founded. In fact, over half of all Fortune 500 companies have been grounded during an economic crisis. This includes well-known companies such as Dropbox, WhatsApp, Uber, and Pinterest (Calvino, Criscuolo, & Verlhac, 2020). New companies are flexible, which means that they can respond to changing situations quickly. For example, during the lockdown in 2020, most people could not/did not leave their houses often. This increased innovations in industries such as home delivery, online education, and telework. For entrepreneurs, it is therefore an attractive time to start a business in these types of industries.

Moreover, because of the lockdown, the vast majority of stores were closed. This forced people to buy everything online ranging from clothing, furniture, and even groceries. This clearly increased the global e-commerce popularity significantly. According to ROI Revolution (Davis & Toney, 2021), retail e-commerce sales grew in 2020 with 27,6%. Besides, a study of Narvar found that 56% of consumers purchased from a retailed that they had not bought from before the pandemic. For start-ups, it means that there is an abundance of opportunities regarding e-commerce and digital marketing.

Challenges

However, COVID-19 also brings many of uncertainties for small businesses. Many countries’ governments naturally want to protect their economies and do this by taking measures such as sustaining short-term liquidity needs. Many start-ups are dependent on e.g., grants, subsidies, or loans, so these restrictions affect start-ups harshly. Secondly, start-ups usually rely on a small number of employees. Due to the coronavirus, the team is a lot more vulnerable. The chance of one of the employees getting sick or having to quarantine is increased significantly (OECD, 2020).

In April 2020, the Startup Gnome (Stangler, 2020) released a report about the impact that COVID-19 has on the startup ecosystems. According to this research, approximately two-third of the interviewed start-ups said they will run out of money within six months, so in October 2020. Moreover, four out of ten companies said this will happen within three months. It shows clearly that a large number of start-ups are struggling due to having little to no income during a period of many months.

Conclusion

In conclusion, the COVID-19 situation affects everyone. It seems as there are much more negative side effects to this situation as there are positive, and in some respects, this is true. However, it is important to also see the opportunities that surface and everything there is to learn. Start-ups are one of the most vulnerable business types and should therefore be listened to, especially during crises.