Startups as a key to thrive after pandemic
As the coronavirus pandemic spread the world, the economic impact was profound. Various studies highlighted the particular risk for those in precarious livelihoods, whether due to their age, their income level, or their ethnicity.
Similar concerns exist at an organizational level, with data from Startup Genome revealing that around 40% of startups have but a few months worth of cash in reserve at the start of the pandemic. As such, it’s perhaps not surprising that research from Yale has found that small business owners are increasingly pessimistic about their future.
The survey reveals that the lockdown procedures imposed around the world have had a huge impact on small businesses across the United States, with many having already laid off a large number of employees by the time the government offered its relief package. Indeed, it would appear that many of the smallest businesses are unaware of the existence of federal support in the first place. Even among those who are aware of its existence, often hold various misconceptions about the aid package.
The researchers plan to continue issuing the survey throughout the pandemic in a bid to further understand the difficulties being faced by the small business community, and then to help them overcome those challenges.
The survey found that 60% of small businesses had let at least one employee go because of the pandemic, with 31% believing they would have layoffs within the next 60 days. Rather worryingly, 25% of respondents thought they would never recover from the current situation, with nearly a third believing it was touch and go whether they would remain in business over the coming months.
This gloomy outlook was getting gradually worse as the pandemic, and the lockdown measures designed to tackle it, spread. In the first week of the lockdown, 37% of small businesses thought they might not successfully recover, but this had grown to 46% by the final week of the study.
This pessimism was compounded by the general lack of awareness of the government support available, with this ignorance especially high among smaller businesses with less than 10 employees. What’s more, this lack of awareness remained worryingly high even as the lockdown continued, with around 30% unaware of the support available by the time the funding for the program had been exhausted.
For those who have managed to survive, many have had to rapidly adapt their offering in order to survive. Pivoting has become the norm for startups, but the scale of pivoting required has nonetheless been difficult for many to achieve.
The changing demands of the marketplace has forced the company to be as adaptable as possible. For instance, customers have been forced to respond to our socially distanced times, and require things such as digital payslips and daily check-ins that were not a key feature of the offering before, but which have been rapidly developed to keep customers on board.
Startups, such as Blink, are perhaps in a reasonable place, and there has been growing support across the world for startups operating in domains that directly impact the pandemic. In Europe, for instance, the European Institute of Innovation and Technology recently launched a €60 million fund for innovators offering high-impact solutions that tackle both the social and economic challenges presented by the pandemic. For startups not operating in this field, however, the future is less rosy.
The researchers draw parallels with events such as Hurricane Katrina, after which new business registrations fell to zero in Louisiana. It prompted the government to provide $9 billion in support for residents as part of the “Road Home” scheme, which the researchers believe helped to contribute to new business creation, and subsequently the wider economic performance of the state.