COVID-19 has adversely impacted the overall investment sector. While businesses across all industries can sense the repercussions of COVID-19, start-ups have mainly been one of the most vulnerable, and in fact, are facing various formidable challenges both, from a business as well as from an operations' perspective. Most start-ups have witnessed a decline in supply and or demand, except for those start-ups that are engaged in the supply and, or delivery of 'essential services', educational technology, gaming or streaming services. Notwithstanding the above, glitches in the supply chain network have either way presented challenges for all start-ups. However, the start-up ecosystem has been continuously striving to adapt to the present situation as flexibly as possible, by focussing on the need to innovate and diversify their business techniques and its operations.
Most existing start-ups face significant challenges due to the COVID-19 crisis, as they are more vulnerable than older incumbents to the shock brought by the pandemic. They tend to engage in high-risk activities compared with other small and medium-sized firms (SMEs), face constraints in accessing traditional funding and have a formative relationship at best with suppliers and customers. They also often crucially rely on a small founding team, and this can further increase their vulnerability to labour supply shocks during the pandemics.
At a time marked by significant economic uncertainty and with their revenues affected by containment measures and considerable drop in demand, start-ups become even more financially fragile. They need support for their short-term liquidity needs, critical for their survival.
In many countries, policy responses aimed at shielding the economy from the crisis are already targeting firms’ financial fragilities, especially for SMEs. These include measures to sustain short-term liquidity needs, such as loan guarantees, direct lending, grants or subsidies. However, policy responses should take into account the specificities of start-ups with respect to other SMEs. Some countries have introduced measures more specifically focused on start-ups. For example, France has set up a €4 billion fund to support start-up liquidity, including bridging start-up funding rounds; Germany has announced a tailored start-up aid programme, expanding and facilitating venture capital financing; and the UK has announced a co-financing fund for innovative companies facing financial difficulties.
While for many businesses, a crisis of this magnitude will, unfortunately, have detrimental effects, in the long run, it could turn out to be a platform for change. A Pune-based start-up Mylab Discovery became the first Indian firm that gets full approval to make and sell testing kits. The company already shipped the first batch of its testing kits to diagnostic labs in Pune, Mumbai, Delhi, Goa and Bengaluru. To beat the deadly virus, the company also says it can supply up to 100,000 Covid-19 testing kits a week and up to 200,000 if needed.
The Government also has introduced a coronavirus risk-tracking app, named Corona Kavach, which is jointly developed by the Union Ministry of Electronics and Information Technology and the Union Ministry of Health and Family Welfare. The app uses persons’ locations to analyse whether they are in contact with coronavirus patients. Besides, the app can provide information about Covid-19 and gain information. It will track the users every hour and then alert them if they have crossed a person who has tested positive for the virus. Currently, the app is in beta version, and available for Android phones on the Google Play Store. Corona Kavach is aimed at providing information about Covid-19 and get information.
In Tirupur, a city in Tamil Nadu, a Coronavirus Disinfectant Tunnel has been built that disinfects when people walk along it. Designed and developed by D Venkatesh, who runs a water treatment company in the city, the tunnel is a first-of-its-kind in Tamil Nadu.
There must be caution, of course. With no guarantees of how this current crisis will end or when, if ever, markets will reach 'normality', it is hard to make too bold a prediction,
What we’ve seen from start-up founders so far are responses in line with their entrepreneurial talent. Embracing change as a chance to innovate is a winning formula for responding to a crisis.
Comments