The Startup Genome has released it’s latest report on the Global Startup Ecosystem. Once again this is an excellent fact-filled report, but what drew our attention is the section titled “Risk of Mass extinction event for startups”. This section details the double impact from a capital shock and a drop in demand, which makes for sobering reading.
In terms of Capital: 40% of startups are in the Red Zone, which means they have three months or less runway; 35% of Series A+ Startups have 6 months or less; 18% have seen a funding round cancelled and 54% have seen their round delayed. VC funding is down 20% in the first three months of 2020.
From a demand-side perspective: 72% of startups have seen their revenue drop since the crisis; the average drop is 32% and 40% have seen a 40% drop! Only 12% are experiencing significant growth.
The report then goes onto further highlight the negative impact of some of the start-up job cuts. 31% have cut jobs in R&D and 32% in Product. Some jobs, they fear, are in Global centres that might lose those jobs forever.
The report goes on to remind everyone that we need the startup economy for jobs and growth. We agree and would add that Financial Services needs startups for innovation. Cloud-based B2B microservice providers hold the key to driving out costs, increasing efficiency and enhancing customer experience for financial services firms.
However, there MUST be a balanced approach to the adoption of services from cloud-based vendors as the current crisis has served to underline.
Ask yourself. What is your plan B?
This is why we launched #Adoptech. We know our industry needs FinTechs to innovate but we also know that this is not riskless as a proposition. Our service assures the availability of cloud-based software and helps the vendors with enterprise-readiness. If you mitigate risk at the beginning of the relationship you can adopt or be adopted quicker. It is as simple as that.