The Impact of COVID-19 on Global Startup Ecosystems

Startup Ecosystems - cfamedia

As the world is shaken in the most dramatic way imaginable, it is time for the global startup community to get closer, support, and learn from each other.

Some do remember the crash of 1987, the dot-com bubble burst of 2000-2001, and the 2007 financial crisis. With COVID-19, not only is the economic crisis sudden, the human impact is also horrific.

To better understand the impact of this crisis on startup ecosystems and to help founders and policymakers get through the storm, Startup Genome is launching the COVID-19 and Startup Ecosystems Series, of which this is our first installment, as well as a Global Policy Database for governments to learn from each others’ initiatives.

Some of the key findings in the reports are:

  • Chinese VC deals have contracted between 50 and 57 percentage points since the onset of the crisis in the first two months of the year, relative to the rest of the world. If a drop like that happens globally, even for just two months, approximately $28 billion in startup investment will go missing in 2020.
  • We can look at the previous two recessions (2000-2001 and 2007-2009) as historical analogies for the current moment. In those cases, the total drops in global VC investments were between 21.6 and 29.3 percent over twelve months — the equivalent of a decline of up to $86.4 billion in global VC investments, when projected to our current context.
  • Technology IPOs in the U.S. dropped by 90 percent following the last two recessions.
  • During the past two recessions, although fewer dollars were invested, more companies got funded.
  • Over half of Fortune 500 companies were created during a recession or bear market.
  • Over 50 tech unicorns, collectively valued at $145.2 billion, were founded during the 2007-2009 recession years.
  • New and young firms are the main net job creators in the economy, and this is especially true during recessions, when older firms are net job destroyers.
  • Governments in many places around the world are helping founders. Denmark is covering 75% of salaries for companies that do not cut staff, while Germany is offering to cover 60% of the new salaries for employees reduced from full to part time.

The full report can be found here.

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