Impact & Opportunities of Covid-19 for startups · 2020. 10. 30. · Product Development Tech R&D...
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EMBARGO JUNE 4, 6AM (PARIS) Impact & Opportunities of Covid-19 for startups a STATION F Study
Transcript of Impact & Opportunities of Covid-19 for startups · 2020. 10. 30. · Product Development Tech R&D...
EMBARGO JUNE 4, 6AM (PARIS)
Impact & Opportunities of Covid-19 for startupsa STATION F Study
with the participation of 120 partner funds:
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Methodology & key data
A global comprehensive study
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956 replies
5 key countries
120+ VC Funds
7,5 %
5,9 %
21,8 %
44,5 %
20,4 % Pre-SeedSeedSeries ASeries BSeries C
Stage of startups in the study
2 weeks
5 main topics
11,5 %
14,2 %
16,3 %
21,0 %
37,1 %FranceUKUSGermanyIsrael
Location of startups in the study
A large variety of companies
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Sectors
0
2,75
5,5
8,25
11
Ecommerce & Retail FinTech HR TechMedTech FoodTech Productivity ToolsEdTech PropTech Travel TechHardware Mobility
15 %4 %
4,5 %
5,1 %
12,1 %
14,2 %
44,8 %
SaaS Marketplace Content & PlatformsMobile Electronics Consumer GoodsOther
Business Model
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1. Business Impact
An impact on business
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91.3% of startups globally felt their business was impacted by the Covid-19 crisis (positively / negatively)
85.35% fewer pre-seed startups felt an impact on business as a result of the crisis
97.37% mid-stage/Series B companies were the most impacted as a result of the crisis
An unprecedented crisis
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Pre-Seed
Seed
Series A
Series B
Series C
80 85 90 95 100
95,83
97,37
92,86
91,6
85,49
% of companies who felt impacted by the crisis (by stage)
An unprecedented crisis
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The Series B round has always been the toughest round, because it's when you leave the "vision" phase (seed and Series A), and enter the "metrics" phase (growth stage).
In the context of a recession, the Series B stage becomes an even tougher place to be. Investors looking for low valuations will naturally go to the earlier stages and investors looking for safer bets will go to the growth stage.
As a founder, it's good to be aware of the above, and plan accordingly. Series B rounds get done all the time - recession or not - so by all means it's not an insurmountable level of difficulty.
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Matt Turck Partner, FirstMark Capital
An unprecedented crisis
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Global
France
Germany
United Kingdom
United States
Israël
80 85 90 95 100
87,5
91,48
95,37
84
91,74
91,3
% of companies that felt impacted by the crisis (by country)
An unprecedented crisis
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When it comes to weathering a storm, before the Covid-19 shock, we have to remember that UK startups were already pricing in a political and economic shift: leaving the EU. The vast majority of companies had gone through planning exercises as part of their preparation for Brexit, and that included planning around things like potential workforce changes.
UK startups are obviously English-speaking, so can naturally expand internationally faster than others. This has probably had an impact over this period on diversified revenues and companies not being concentrated on one geography. If your customer base is significantly local and that area has been hard hit – bearing in mind the Covid response has had to be country-specific – that could have impacted your revenues more completely.
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Evgenia Plotnikova Partner, Dawn Capital
An unprecedented crisis
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Original impact on startups globally
73,1 %
26,9 %
Positive Negative
78,5 %
21,5 %
France
63,1 %
36,9 %
United Kingdom
76,2 %
23,8 %
Germany
65,1 %
34,9 %
United States
74,1 %
25,9 %
Pre-Seed
72,1 %
27,9 %
Seed
70,8 %
29,2 %
Series A
81,1 %
18,9 %
Series B
71,4 %
28,6 %
Israel
76,1 %
23,9 %
Series C & +
An unprecedented crisis
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Global
France
Germany
United Kingdom
United States
Israel
0 15 30 45 60
14,29
16,28
16,5
28,57
25,4
23,7
28,57
39,53
40,78
28,57
35,37
36,1
57,14
44,19
42,71
42,86
39,23
40,2
Improvement No change Deterioration
Evolution of the impact of the crisis since the beginning
Spending reductions
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71.7% of startups reduced spending since the beginning of the crisis
60.52% reduced spending on marketing & communications
14.32% reduced spending on customer service
An unprecedented crisis
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Marketing/Comms
HR/Hiring/TeamReal Estate
BizDev/Sales
OperationsProduct Development
Tech
R&DCustomer Service
0 17,5 35 52,5 70
14,32
17,79
19,96
22,13
36,88
37,31
37,74
55,31
60,52
sectors impacted by cost-cuts since the beginning of the crisis
Government Support
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Use of government support globally
France United Kingdom
GermanyUnited States
0
15
30
45
60
12,9
2823,1
51
Grant / Subsidy / Loan
Furlough Support
Not eligible
Not interested
0
17,5
35
52,5
70
10,6
23,3728,1
61,24
0
17,5
35
52,5
70
15,89
33,6432,7133,64
0
17,5
35
52,5
70
18,02
25,53
0
59,57
0
17,5
35
52,5
70
2824
16
48
0
17,5
35
52,5
70
50
37,5
25
0
Israel
Pre-Seed Seed Series BSeries A
0
17,5
35
52,5
70
12,98
51,15
9,16
31,3
0
17,5
35
52,5
70
15,03
26,22
20,98
53,85
0
17,5
35
52,5
70
12,1412,14
32,14
62,86
0
17,5
35
52,5
70
12,82
28,2
38,9
51,28
0
17,5
35
52,5
70
6,25
20,83
39,58
45,83
Series C & +
Government Support
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While the Israeli Government has been very supportive to its startups through multiple grant programs, it was slow to offer grants or support programs for the Covid-19 pandemic, forcing the local high-tech sector to rely almost exclusively on internal resources. The fact that many of us investing in Israeli startups are veterans of the 2001 and 2008 crises, combined with the high-rate of second-time entrepreneurs, have helped the ecosystem to identify the severity of the situation early on and to respond quickly to the changing market conditions.
Israeli entrepreneurs are trained to handle adversity. Israeli people in general are very agile and quick to adapt to new circumstances due to the geopolitical uncertainty in the region since the inception of the State of Israel. Resilience in the face of adversity is being practiced from an early age, and agility & improvisation is commended. This skill set becomes especially useful in times of trouble, and Israeli entrepreneurs are especially good at it.
«
Yash Hemaraj Partner, Benhamou Global Ventures
Government Support
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50.80% of entrepreneurs think that government support measures were announced quickly
42.60% of entrepreneurs think that government support measures were easy to understand
13.90% of entrepreneurs think that government support measures was too long to obtain
Government Support
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The government's reaction was positive and recognized the importance of the startup ecosystem across Europe - it also highlighted the startup ecosystems growing ability to lobby government in a more coherent fashion.
Also, much of the support that startups received was a part of the spectrum of support for SMBs (rather than specifically startups) - including loans and staff furloughing in the UK. Pre-seed startups with little or no revenue don't really fit this SMB category and fell outside the scope of support in many countries.
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Jon Bradford Partner, Dynamo
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2. Reinventing Product
Reinventing Product
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18.3% of startups made a pivot during the crisis. 12.8% are thinking about doing one in the next 6 months.
Strategic changes made by startups globally since the beginning of the crisis
21,8 %
9,4 %
9,9 %
16,0 %
18,3 %
24,7 % Change of go-to-market strategyPivotLaunch of new offerMajor product changesChange pricing strategyNone
Reinventing Product
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20,9 %
8,4 %
5,4 %11,6 % 22,8 %
30,9 %
Change of Go-to-market strategy Pivot Launch of new offerMajor product changes Change pricing strategy None
Pre-Seed Seed Series A Series B Series C & +
17,2 %
8,9 %
12,4 %
27,0 %
14,7 %
19,8 % 25,7 %
7,1 %
9,3 %19,3 %
15,7 %
22,9 % 15,8 %
5,3 %
7,9 %
23,7 % 18,4 %
29,0 % 27,1 %
6,2 %
22,9 %16,7 %
10,4 %
16,7 %
Strategic changes made by startups since the beginning of the crisis
Reinventing Product
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21,2 %
8,8 %
12,1 %13,9 %
19,6 %
24,5 %
Change of Go-to-market strategy Pivot Launch of new offerMajor product changes Change pricing strategy None
France United Kingdom United States Germany
27,8 %
10,2 %
6,5 % 12,0 %
19,4 %
24,1 % 19,1 %
10,6 %
14,9 %
12,8 %
12,8 %
29,8 % 28,0 %
4,0 % 4,0 %16,0 %
20,0 %
28,0 %
Strategic changes made by startups since the beginning of the crisis
Reinventing Product
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It’s too early to make any sort of prediction of what happens next – that’s why we’re referring to what we have seen so far as “the first order of impact.” It’s bad, but relatively contained.
If your customers are calling to cancel their contracts, you want to offer price breaks or make the service available for free for some time (add these months to the end of the contract) to avoid churn at all cost.
Finally, developing key functionality to enable collaboration or remote should be on top of the priority list. You want to delay your fund raising if you can, because it’s going to take longer and terms/valuations may be harsher.
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Jeff Clavier Managing Partner, Uncork Capital
International Development
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No impact
Speed of plan
Postpone of plan
Scale Down
Change country
0 12,5 25 37,5 50
4,2
8,9
20,3
10,9
48,7
Impact on international development plans as a result of the crisis
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3. Employment
Impact on talent and recruitment
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24.26% of startups globally had to furlough staff to escape the crisis
16.82% of startups globally had to layoff employees since the beginning of the crisis
48.50% of startups globally hired new people since the beginning of the crisis
78.20% of startups globally plan to hire new employees before the end of the year
Furlough
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use of furlough per stage
0,0
12,5
25,0
37,5
50,0
Pre-Seed Seed Series A Series B Series C Global
24,26
37,5
44,74
29,29
22,03
12,78
use of furlough per country
0,0
10,0
20,0
30,0
40,0
France UK US Germany Israël Global
24,26
37,5
28
10,64
34,26
24,78
Furlough
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% of overall staff on furlough use of furlough by department
34,2 %
7,6 %16,5 %
15,2 %
11,4 %
15,2 %
<5%5/10%10/20%20/30%30/40%+40%
SalesMarketing
OperationsCustomer Service
DevCommsProduct
HRSenior Management
Finance
0 15 30 45 60
8,2
13,9
13,2
19
22,2
25,3
27,2
43,7
43,7
57,6
Furlough
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plans to stop using furlough by month
12 %
2 %
10 %
15 %
10 % 13 %
23 %
14 %MayJuneJulyAugustSeptemberOctoberNovemberDecember2021
1. Travel
2. FinTech/AssurTech
3. Mobility
Sectors that plan to use furlough until 2021:
Layoffs
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% of startups that laid off (by stage)
0,0
10,0
20,0
30,0
40,0
Pre-Seed Seed Series A Series B Series C Global
16,8216,67
34,21
23,57
15,03
8,4
% of startups that laid off (by country)
0,0
10,0
20,0
30,0
40,0
France UK US Germany Israël Global
16,82
25
38,3
17,02
19,44
13,24
Layoffs
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% of the team laid off primary department impacted by layoffs
5,6 %
6,5 %
12,0 %
18,5 %
28,7 %
28,7 % <5%5/10%10/20%20/30%30/40%+40%
SalesMarketing
DevOperations
Customer ServiceProductComms
HRSenior Management
Finance
0 10 20 30 40
0
2,8
2,8
3,7
4,6
5,6
11,1
13,9
20,4
31,5
Layoffs
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AdTechBlockchain
CleanTech/GreenTechCybersecurity
DevToolsEcommerce/Retail
EdTechEntertainement/Gaming
Fashion TechFinTech/AssurTech
FoodTechHardware
HR TechIT / Infra
Logistic/Supply ChainMedia
MedTechMobility
Productivity ToolsPropTech
SportTechTravel
0 10 20 30 40
36
15,79
19,23
11,1
29,17
12,9
7,14
13,04
0,6
23,68
16,67
8,33
17,65
2
1,2
15,38
23,18
18,75
17,27
15,38
22,2
12,5
Layoffs by sector
Hiring
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47.9%of startups globally hired new employees since beginning of March
78.2%of startups globally plan to hire new employees before the end of the year
Number of people to be hire before end of the year per company
3,7 %
2,5 %
9,3 %
28,4 % 56,1 %
<55-1010-3030-5050+
For companies that plan to hire
Hiring
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The optimist in me thinks that given the caliber of talent now working for themselves, and with competition abound, we are about to see some of the best innovations of our generation emerge.
I believe profitability is "the new black" and the strongest founders are currently saving their acorns for a rainy day, or rainy months.
As a VC, resourcefulness and agility are the most important signs to look for in a great founding team to back with investment dollars. I've become obsessed with the European startup landscape and am looking forward to investing more in French companies, in particular, in the years ahead. "
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Soraya Darabi General Partner, Trail Mix
Hiring
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Primary roles to hire before 2021
DevSales
MarketingProduct
Customer ServiceOperations
CommsSenior Management
FinanceHR
0 12,5 25 37,5 50
4,1
7,5
9,6
10,2
18,6
19,8
27,7
28,9
39,9
47,3
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4. Funding & Cash
Funding
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36.9% of startups globally are currently looking to fundraise
26.25% of French startups only are looking to fundraise
18.30% of startups currently fundraising have experienced a VC pulling a term sheet as a direct result of the crisis
Funding
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% of startups currently looking to fundraise (by stage)
0,0
12,5
25,0
37,5
50,0
Pre-Seed Seed Series A Series B Series C Global
39,6
22,92
31,58
44,4
35
38,93
% of startups currently looking to fundraise (by country)
0,0
20,0
40,0
60,0
80,0
France UK US Germany Israël Global
39,6
75
60
42,5542,59
26,25
Funding
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Funding delayed
Has recently raised
Was not planning to raise
Looking at alternatives
Impact on the amount
0 10 20 30 40
16,5
18,5
18,7
20,5
39,8
Impact on funding plans for startups globally
Funding
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47.30% of entrepreneurs see less VC interest, availability or reactiveness since the beginning of the crisis
16.20% of entrepreneurs face more difficult negotiations with investors since the beginning of the crisis
24.50% of entrepreneurs don’t see any change in their relation with investors since the beginning of the crisis
Cash runway
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Time before running out of cash (globally)
FranceUnited
Kingdom GermanyUnited States Israel
Pre-Seed Seed Series BSeries A Series C & +65,9 %
19,4 %
8,3 %
4,1 %
1,4 %
0,9 %
< 2 weeks 2-4 weeks1-2 months 3 months4-6 months > 6 months
65,9 %
20,2 %
8,6 %
3,9 %
1,2 %
0,3 %
65,7 %
18,5 %
6,5 %
4,6 %
2,8 %
1,9 %
84,1 %
10,5 %
4,2 %
0,7 %
0,5 %
67,3 %
19,8 %
4,0 %
7,9 %
0,9 %
0,2 %
74,0 %
24,7 %
1,2 %
0,1 %
0,1 %
42,3 %
30,8 %
15,4 %
6,2 %
2,3 %
3,1 %
65,3 %
20,0 %
8,8 %
4,6 %
1,1 %
0,4 %
76,8 %
15,9 %3,6 %
2,2 %
1,4 %
0,1 %
81,6 %
10,5 %
2,6 %
5,3 %
95,8 %
2,1 %
2,1 %
Cash runway
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Given the robust venture capital ecosystem in the United States, it is not surprising that US startups are holding somewhat more capital than elsewhere in the world.
On the whole, venture backed startups in the US took quick action to sure up their balance sheets as soon as the pandemic hit. Those actions included drawing down existing debt lines, renegotiating expenses, taking company-wide pay cuts, and in some instances laying off or furloughing employees. Startups took whatever steps necessary to extend their runways in light of the uncertainty of the fundraising environment during the pandemic. Those efforts clearly paid off in most instances by significant extending runway.
«
David Hornik Partner, August Capital
Closing a business
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GlobalPre-Seed
Seed
Series ASeries BSeries C
FranceUK
USGermany
Israël
0 3 6 9 12
0,5
11,53
8,33
1,83
5,9
0
2,63
2,14
5,94
11,45
5,7
% of companies that consider stopping their activity before December 2020
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5. Work habits
Transforming offices
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% of team members working from home
before the crisis
France United Kingdom
GermanyUnited States Israel
Pre-Seed Seed Series BSeries A Series C & +
38,7 %
6,7 %5,8 % 10,1 %
24,2 %
14,5 %
0% 1-20%21-50% 51-70%71%-99% Full remote
47,3 %
6,8 %
5,0 %
7,7 %
18,9 %
14,2 %27,8 %
3,7 %
9,3 % 7,4 %
36,1 %
15,7 % 20,9 %
10,4 %2,1 %
20,9 %
27,0 %
18,8 % 23,7 %
15,1 %
4,4 %12,6 %
32,0 %
12,1 %
36,9 %
12,3 %25,7 %
3,1 %
21,9 %
58,3 %
4,7 %
3,1 %
9,4 %
10,2 %
14,2 %
39,6 %
7,7 % 7,7 %
10,5 %
18,6 %
15,8 %30,2 %
5,0 %
4,3 % 8,6 %
36,0 %
15,8 %29,0 %
5,3 %
7,9 % 10,5 %
39,5 %
7,9 %20,8 %
12,5 %
2,1 % 10,4 %
45,8 %
8,3 %
Transforming offices
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Increase % of team working from home
Decrease company travel
Decrease of office space
Increase budget for remote working tools
Not make change
Increase budget for company events
Decrease budget for company events
Go full remote
Increase company travel
0 12,5 25 37,5 50
2,6
9,3
10,7
14,5
19,7
22,3
28,7
30,9
46,8
% of companies that will
Attending events
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34% of entrepreneurs do not feel comfortable attending large scale conferences before 2021
when people will feel confortable attending large scale conferences
8,6 %
6,3 %
14,3 %
22,5 %27,6 %
20,8 %Q3 2020Q4 2020Q1 2021Q2 2021Prefer online eventsDon't attend event
Press ContactGrégoire Martinez
Head of Community & Communications [email protected]
— Confidential —
STATION F
