Startup Genome: 40pc of start-ups could fold within next three months

21 Apr 2020

Image: © denisismagilov/

A Startup Genome survey suggests that 42pc of start-ups are in the ‘red zone’, which means they have three months or fewer of runway.

In early April, research and policy advisory organisation Startup Genome published a report detailing the impact that Covid-19 may have on global start-up ecosystems, suggesting that up to $28bn in start-up investment could be lost globally in 2020.

In its second analysis, Startup Genome has surveyed start-up leaders on how they believe the pandemic will affect capital, talent and jobs, the general market and policy.

The aim of the report, which surveyed more than 1,000 leaders in 50 countries, was to get a better understanding of the impact of Covid-19 and to help founders and policymakers “get through the storm”.

The findings

Startup Genome found that 42pc of start-ups surveyed are in the ‘red zone’, which means that they have three months or fewer of runway ahead of them.

The organisation said: “This means that if their expenses and revenues remain as they are now and they do not raise additional capital, four out of every 10 start-ups will die in the next three months. This number is up from 31pc in December 2019.”

One-fifth of start-ups surveyed that had a term sheet before the onset of the crisis said they have seen the term sheet cancelled by the investor, while 55pc said that they have seen the process “slow down significantly”. Only 25pc said they have had the term sheet process continue normally or have secured the funds.

Meanwhile, 58pc of start-ups that responded to the survey said they have had to terminate some full-time employees since the Covid-19 crisis began. The majority of these terminations took place in North America (70pc), followed by Europe (55pc) and Asia (36pc).

Across the market, 71pc of respondents said they are operating in industries negatively affected by the pandemic. Only 15pc of start-ups said that they were unaffected, while 10pc said that they were in industries experiencing growth.

Is policy helping?

Across Europe, there have been some significant changes in start-up policy in light of the ongoing situation. This week, the UK launched a £1.25bn support package, shortly after France offered €4bn in support to start-ups and Germany offered a €2bn package.

At the time of Startup Genome’s survey, 43pc of start-ups said that they were not helped by relief policy measures, adding that they do not expect to be helped by government supports. A further 19pc said that they are not currently helped by policy measures, but do expect to be helped soon.

Startup Genome polled respondents on the most helpful policy measures. Just under a third (30pc) of respondents said that grants to preserve company liquidity would be most helpful, while 19pc said that instruments to boost investment would be most helpful.

Respondents also cited supports to protect employees, such as payroll supplementation grants (15pc), and loans to preserve liquidity (12pc).

Kelly Earley was a journalist with Silicon Republic