How is Coronavirus affecting the European startup ecosystem? In the past couple of weeks, the situation has become more extreme with a ‘State of Emergency’ being called in some countries, leaving other regions unsure of what’s to come next. Here at EU-Startups we have already been hit, postponing the EU-Startups Summit to April 2021.
In this time of uncertainty, many are questioning how other startups are doing, which industries are most affected, how to mitigate losses and if there are any ‘positive’ windows of opportunity. To try and get a clearer picture, we’ve gathered some responses from startups and venture capital firms across Europe. Although we can’t predict the future, what’s clear is that there is a collaborative feeling amongst startup players, with everyone eager to share their tips for survival.
- A remote (and strong!) workforce
With travel restrictions and quarantines in place, remote work and video conferences are the new normal. With their notoriously flexible nature and digitally-savvy teams, many startups are jumping right into it with a positive attitude. “We are facing it pretty well so far!”, says Eva Deniel, of French startup Assoconnect.
Startups that are benefitting most obviously are those providing remote meeting, productivity, and team wellbeing/tracking tools. André François, CEO of Swedish employee wellbeing startup, comments: “Our startup Happy at Work is seeing that bigger clients seem more interested now when they are working remote! We can offer clients a smart digital solution to maintain well-being during this difficult situation”. Additionally, some startups are offering free trials or extending services to help their fellow entrepreneurs weather the storm, and to (hopefully) increase interest in their product. Pablo Hernández, Brand Manager at Factorial HR, commented: “We are allowing everyone to signup for free indefinitely so they can use our time and attendance tools, e-signature, time-off management, document management, etc. We’ve seen plenty of companies are not yet ready to get fully digital so we have decided to help them a little bit.”
2. Entertainment startups: takeaway food, home workouts and gaming
A boom in the delivery sector is also underway, with more people ordering food and groceries to their door to keep to their quarantine and support local shops. Deliveroo is enforcing no-contact drop offs, and Glovo has seen a 60% increase in its pharmacy product delivery in the last week, even offering free delivery for pharmacy products across Spain.
Keeping entertained is also on the top of many people’s lists, which means good news for fitness, gaming, e-sports and social media apps. Qui Marin, Country Owner Spain of e-photo printing startup Cheerz, signalled: “Our app is perfect to be able to take advantage of these moments at home – we have seen how interest in our scrapbook or DIY albums is increasing.”
This is even making ripples in the fashion tech world. Despite closed factories and staff shortages, home delivery services are rocketing, and changing the way startups work long-term. Frederikke Schmidt, founder of Roccamore, said: “[We] always offered home delivery but people never really cared. The last 8 days we have seen a 200% increase in home delivery…Now we offer 45 days full return right, as opposed to the 14 days we had before, which is making people more comfortable to shop.”
3. Boosts for healthtech, biotech and fintech
Unsurprisingly, there is a flurry of interest in the healthtech industry, with supranational organisations offering for fast-track funding for COVID-19 solutions, and venture capital firms and angels looking to do their part for global health and ride the wave. We’ve also heard of larger companies re-purposing their factories to produce hand sanitizer, testing kits and masks, showing potential for scaleups in a similar area to join forces in the fight. Even 3D printing startups are offering their services for medicine.
Fintech is also seeing a window of opportunity, with challenger banks and finance apps offering online services for their customers stuck at home. As stated by Frank Zhou, CEO & Founder of Zeux, an online payments, banking and investment app: “The ‘silver lining’ is that we see a potential for a faster pace to a cashless society and the increasing opportunity for digital payments.”
4. Desert-island survival for travel
For startups working in the tourism, travel, logistics and events industries, things seem more complex. On one hand, Helder Reis, co-founder of Flyenvoy, a Dutch private jet startup, has seen that due to “thousands of travellers stranded abroad, there is a surging demand”, but for many others the situation is not so positive. For the rest of the travel industry, and those supporting it, there has been “a complete shutdown…ultimately affecting our sales and businesses”, as signalled by translation startup Linguidoor.
To mitigate this, some are adjusting their lead generation strategies and product offerings. Ben Stephenson, founder and CEO of travel tech startup Impala, said: “We are still a startup but we’ve decided to waive our charges for our smaller customers…we want to make sure that when the world returns to normal, that these companies are still there trying to make the whole experience better for guests and more profitable for hoteliers. Together we can bounce back.”
For the startups going into survival mode, though, does this mean team cuts, salary cuts, pauses on hiring? Not absolutely, as many startups will be supported by their governments by deferring tax and social payments – measures that have already been discussed publicly by Spain, Italy, Sweden, the UK, Austria, Norway, Ireland, Finland, The Netherlands, Denmark, Germany, Belgium, and France. Moreover, many teams can save office costs by hiring 100% online. For example, Jani Ekonoja, co-founder and CEO of Swedish startup eStable commented: “Starting this week, we extended our team with 3 new amazing people. The plan was to have a fabulous week at our new office in Slovenia, but instead we had to do a fully digital onboarding.”.
5. The fundraising horizon
Opinions are mixed on the state of funding rounds in the coming months. According to CB Insights forecasts, funding will slow down during the next quarters, with some even feeling that “disinvestment” will be heard more often in the countries that have been hit hardest. Additionally, due to the lock down of Universities, support offered by academic accelerators and incubators will be off the cards.
Public grants and funding from national and supranational organisations may be a more stable route to follow. “Government support in the form of grant funding for innovative business is likely to increase in the coming weeks and months,” says Alex Chalkley, founder of Venturenomix, “- both in terms of the number of funding opportunities being published and the amount of grant funding made available under each call for proposals.” Applications can be cumbersome to complete and require external support from experts, plus may become more competitive, but at least there will be funding available. On 3 March, the Commission committed up to €45 million for research on vaccines and treatments, which is to be matched by the pharma industry. In a recent press release, Commission President Ursula von der Leyen commented: “In this public health crisis it is of utmost importance that we support our leading researchers and tech companies.” If your startup is thinking of heading in this direction, you should consider prioritising R&D grant funding as part of your overall funding strategy.
On the other side of the coin, if you’re set on private funding you might need to aim further afield. Antonio Sacca of venture capital firm Hephaestus Venture in Italy, suggests to look outside Europe: “A lot of scaleups will be forced to expand their business in the emerging markets to externalize operations. Probably there will be an increase of Greenfield Investments especially in LATAM and Africa.”
Alternatively, others suggest turning to focus on their own sustainable model and bootstrap. For example, René Stampfl, VP EMEA of meepl, highlights: “It’s important to not only take some time to reflect on your business model as a startup – how do you grow if you can’t access investment via traditional routes?”
Finally, thank you to all those who contributed with their quotes. Among the startups and investors we spoke to, many are eager to share their tips for fellow founders during this time; we will use this information to create a follow-up article.