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Smart Start-ups Despite COVID-19

According to International Monetary Fund (IMF) release on Wednesday, April 1, 2020, the Global policymakers must enact “wartime” measures for households, businesses, and the financial sector to fight the coronavirus pandemic. The governments should provide key supplies to the health sector, cash transfers to individuals who lost their jobs, and “exceptional support” like wage subsidies to private companies. “If policies ensure that workers do not lose their jobs, renters and homeowners are not evicted, companies avoid bankruptcy, and business and trade networks are preserved, the recovery will occur sooner and more smoothly,” the IMF said[1]. The key points from the IMF release are:


  • Global policymakers must enact “wartime” measures to fight the coronavirus pandemic.

  • The IMF predicted the “war” phase of the pandemic will endure “at least” one to two quarters.

  • The success of policy measures from governments will determine how quickly the economy can recover once the spread of the virus is contained.


Impact of COVID-19 and Start-ups


As many of these present initiatives are for sustaining existing businesses, Start-ups are worrying about the rising economic uncertainty that comes with a pandemic. The COVID-19 pandemic's ripple effects across private financial markets continue to widen. The signal to Start-ups is to be prepared for the worst as it could be challenging for them to secure additional money for the next few months amidst the crisis. With the food service, airline, and hospitality industries hardest hit thus far, government support for Start-ups during economic uncertainty is limited.


Starts-ups may qualify for funding under various grants and contributions programs available at different levels of governments. There are cash grants, express loan programs, and business supports available; in fact, most of the cash grants are non-returnable and can assist Start-ups to meet the initial expense of starting the business. In many cases, cash grants only cover the cost of business plans, feasibility studies, basic equipment and marketing expenses. The amount of such grant funding also varies between countries, governments, and institutions. According to Leah Hodgson, post on April 2, Germany unleashed $2.2B boost for Start-ups:


The German government has launched a support package worth €2 billion (about $2.2 billion) for Start-ups affected by the coronavirus. The state will work through venture capital firms that will distribute the funds to the struggling businesses.[2]


Despite governments stepping up, on the private sector side, the Angel, venture capital and Start-ups funding witnessed a decline in the quantum of funds due to the COVID-19 outbreak, with venture capital funding being low due to the increased risk. The quantum of deals across angel, seed, and venture capital has dropped in comparison with Quarter1 (Q1) 2019.



Source: CBINSIGHTS[3]

“Venture Capital investors are now holding back their plans for Start-up funding due to the fallout of economies in coping with the crisis,” a research firm said[4]. Uncertainty is a big challenge at present with international travelling restrictions adding to insecurity of investments. Having said that, investors will keep investing where the economic climate makes the most sense, and where the deal sizes are more reasonable and investments more reliable. Given the changing economic landscape, the investors will want to shift their investment objectives to address new and different opportunities. Start-ups may want to look at the shift in needs and market demands and adjust their business plans or feasibility studies accordingly. Finding the needs and researching the market demands are vital to accomplish success in their business.


Business dreams need not be crushed by COVID-19 but adjusted for a short term. Shifting production into critical medical supplies amid pandemic is a prime example. The Canadian government is encouraging creativity like producing hand sanitizer instead of luxury perfumes, making ventilators and other health-care equipment instead of auto parts. Even as a Start-up, if your idea can accommodate a need for now, you can build up your dream on it later. If you can be a solution to a need then speak up about your Start-ups business to the funding providers: public sectors and private sectors.

Dr. Pawan Chugh

[1] https://www.cnbc.com/2020/04/01/imf-says-coronavirus-crisis-requires-wartime-policy-response.html [2] https://pitchbook.com/news/articles/coronavirus-updates-latest-news-and-analysis [3] https://www.cbinsights.com/research/coronavirus-covid-corporate-venture-capital-investment/ [4] https://www.financialexpress.com/industry/sme/start-up-funding-sees-a-decline-venture-capital-investments

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