Get All Access for $5/mo

How Coronavirus Will Affect the Start-Up Industry And Overall Economy The spread of coronavirus outbreak has left businesses with deeper collision on counting costs around the world.

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Shutterstock

The coronavirus is officially a pandemic now and all companies (start-up or established) are facing an unprecedented challenge. Bill Gates warned that a virus could lead to a global economic depression.

Once the world realized that the effects of COVID-19 are going to last for a long time, people began to scramble for the plan-B. Sequoia Capital, one of the most respected names in the venture capital industry around issued a Black Swan advisory to its portfolio companies, asking them to conserve cash and cut spends.

Industries across the board have been hit. Aviation consultancy Centre for Asia Pacific Aviation (CAPA) has said that airlines across the world might go bankrupt by May. Hotels are reporting a 95 per cent dip in occupancy rates. March to May has been a complete washout in Indian tourism. Bookings for June-December are down by over 80 per cent. Business of cab services were already down 30-40 per cent since February.

What Does This Mean For Start-Ups?

Let's put it this way. If you are an early-stage start-up then you are going to float. The only costs you have to worry about are yourself/founders. If you are a start-up looking for angel funding, you are good. You can raise the funds you need locally.

WFH Good For Business, Not For Funding

If you have just raised a round of funding or if you have funds for the next six months, you are good. However start-ups in the middle of series A, B and C rounds will be hit the mostas such investments require several rounds of meetings and due-diligence between the investors and the co-founders. Since investment firms that lead big investment rounds are based in different parts of the world, it's not feasible for them to close investment rounds in current circumstances. There are already reports of some of the big investors putting their investment plans on hold for the time being. Big rounds of investment take time to fructify and cannot be closed without meeting the co-founders in person. These are challenging times, but I guess a few investors might soon come out with a way as how to close larger deals remotely.

Funds Stuck In Stock Markets

Start-ups generally approach large family offices for bridge loans in between investments. This is mainly done to cover cash flow so that start-ups can tide over for a couple of months until the funding comes in. However, it is possible that this source of funding might also dry up. Large family offices that invest/loan money to start-ups typically have a certain amount of their own funds invested in stock markets across the world. With markets recording over 20 per cent decline, it is unlikely that any of these offices will deploy funds into start-ups until their stock portfolios improve.

Which Start-Up To Invest In

A major trend that will hurt the start-up sector is their "burn cash to grow' strategy. Start-ups across have burned billions of dollars in their quest for growth. As funding dries up, start-ups will be forced to look at profits. It's a given that there is will be a global recession for the next quarter or two. It's going be harder for businesses to increase consumers and show traction. Consumers may not buy as much as they used to. The growth metric of these start-ups will suffer making it even more difficult for them to raise a round of funding. Venture funds will have a simple choice: Should I focus on my best-performers or should I risk it on questionable companies? The answer is not tough.

Dr. Apoorva Ranjan Sharma

Co-founder and managing director, 9Unicorns

Dr. Apoorva Ranjan Sharma is the Co-founder and Managing Director of 9Unicorns. He is a seasoned veteran in the startup sector and a serial investor.

News and Trends

Tech Burner's Anarc Smartwatch Achieves INR 3 Cr Sales with USD 1 Mn Investment

Anarc features a patented octagonal design by Thought Over Design and Seymourpowell, with a medical-grade stainless steel body. It includes advanced technology like a Hisilicon chipset, AMOLED display, and seven-day battery life.

Starting a Business

He Started a Business That Surpassed $100 Million in Under 3 Years: 'Consistent Revenue Right Out of the Gate'

Ryan Close, founder and CEO of Bartesian, had run a few small businesses on the side — but none of them excited him as much as the idea for a home cocktail machine.

Diversity

5 Ways You Can Create a More Inclusive Workplace Immediately -- and Why You Should

The more diversity you bring to your team, the greater your chances of finding groundbreaking insights and solutions.

Marketing

4 Neuromarketing Hacks to Reach More People and Maximize Results

You don't need to be a neuroscientist or have a big budget to start upping your conversions immediately.

News and Trends

Insurtech Player Zopper Raises $25M in Series D Funding

With 40 insurance companies and 2500+ ecosystem players, Zopper will utilize the fresh capital to ramp up digital infrastructure, by strengthening its Insurance Distribution platform

Business News

'Do You Sell Cars?': Tesla CEO Elon Musk Trolls Jaguar Rebrand on X

The team running Jaguar's X account was working hard on social media this week.