New Survey Highlights Impact of COVID-19 On East Coast Startups
Our COVID-19 Startup Impact Survey offers an in-depth look into the impact of COVID-19 on Atlantic Canadian startups. Atlantic Canadian entrepreneurs are resilient and dedicated to their visions even through challenging times. Evidently, COVID-19 has brought new challenges to many startups. While some sectors are harder hit than others, there is no doubt that everyone shares the burden of decreased economic activity and increased concern for the health of friends and family.
The impact of COVID-19 on jobs
We have compiled the results and broke them down into three startup categories: pre-revenue, early stage and established startups.
Layoffs are one of the first topics that come to mind amongst employees and employers during any crisis. Since the beginning of the pandemic, 15.84% of respondents reported laying off staff. Of those layoffs, 63% have come from early stage startups, 31% came from pre-revenue startups and established startups represent only 6%.
On the flip side to this, entrepreneurs are optimistic about revenue growth. Early stage startups appear the most optimistic, representing 62% of those anticipating revenue growth. Pre-revenue startups and established startups represent 23% and 15% of those anticipating revenue growth respectively. It is important to note the forward-looking statements should not be read as guarantees of future performance.
The impact of COVID-19 on investments
The investment environment is changing rapidly throughout the pandemic. Investors initially went on the defensive to support existing portfolio companies, creating a new challenge for those companies attempting to raise funds. There are a few interesting things to note related to investment activities from this survey:
- The majority of entrepreneurs are actively seeking investment. Pre-seed and angel investments are the most sought after.
- The majority of entrepreneurs feel their valuations will stay the same or increase as a result of COVID-19.
- 74.7% of startups have less than 12 months of runway. With the majority having less than 9 months.
Entrepreneurs appear optimistic about the investment environment. One of the key things that help drive investment and valuations are progress towards meaningful milestones. A conflicting statistic present in the data was that close to half of the respondents indicated that COVID-19 had a negative impact on their business yet entrepreneurs are optimistic about their valuations. There appears to be a disconnect here.
What’s more, many respondents indicated challenges related to sales and marketing, specifically generating top of the funnel leads. If sales and marketing activities fail to yield results it will jeopardize important milestones and will affect a startup’s ability to raise follow-on financing. With the majority of entrepreneurs holding the opinion that things will return to normal late 2020 or early 2021, it is important to remember runways will be extremely short at that time.
Government support
The Federal Government has been spending a tremendous amount of resources on supporting Canadians throughout the pandemic on all fronts. While our data details which programs are being used by entrepreneurs, it is important to recognize that there is still more support needed in the community. 16.83% of respondents indicated that their business is not eligible for any programs, and pre-revenue companies are feeling left out when it comes to these support programs.
In terms of additional support, the top three requests coming from the survey center around raising capital, sales/marketing and runway extension. All three of these requests show that entrepreneurs, while optimistic, are still cautious about what lies ahead.
While there remains optimism in the ecosystem, we must be careful not to glaze over the risks should the challenges of COVID-19 last longer than anticipated.
