The world continues to battle against the global Coronavirus outbreak. The outbreak has affected many startups’ lifecycles and has hit the travel & hospitality sectors the most. This has invited many uninvited problems. The startups which just began to grow had no earnings whatsoever. Startup community including venture investors, entrepreneurs or established startups has appealed to the Prime Minister and the finance minister of the country through a letter. The letter explains how the COVID-19 crisis is threatening the progress and future potential of established startup ecosystems. The letter was co-signed by founders of leading startups such as Swiggy, Aarin, Blume, Udaan, etc.
The startup culture across the nation is comparatively young, hence, most vulnerable to external pressures. During this economic downturn, many startups are prepared to witness devastation like never before. Seeking financial support for the established startups is easier but what about those which just started to grow. Bill Gates has already warned about the global economic depression. And now every company irrespective of its size, is facing an unprecedented challenge.
Let’s put it in this manner! If you are an early-stage startup, nobody can rescue your business from hovering here and there. Because you can not step out for funding at this time as well. The COVID-19 has already dwindled funding. So, what can you do? You can just wait for this outbreak to end. As per the reports by several reputed agencies, this virus is not ending that soon. Even if you get funding to cover your negative cash flows, the money will dry up in the twinkling of an eye.
With markets recording a 20% decline (one of the most severe declines in history), it is unlikely that large-family businesses will deploy their funds into startups. Large businesses are definitely going to wait until their portfolios improve in the market.
Profitability has been a serious concern for startups and with this economic downturn, it is impossible for startups to show relevant & required revenues for funding. There are many startups that have burned billions of INR or Dollars in their quest for growth and are still unsuccessful.
But, there are those founders too who aim to start a business from scratch without any funding or public aid.
It will be an immense challenge for such startups to rebuild the trust that they have created in the past. It’s a given fact that there will be a global recession atleast for the next quarter. The growth metric for non-established startups will be moderate and sedate in the future.
- It’s easy for venture capitalists to differentiate between best-performers and questionable companies.
- It’s easy for acclaimed startups to approach businesses and VCs for funding.
- It’s easy for the government to provide subsidies.
But, it’s NOT easy for non-acclaimed startups to pave their ways amidst or even after the lockdown. They have a really long way to go! We wish all the best to the founders of such businesses.