Covid-19 causes 32% revenue decline in local startup sector

An investigation conducted by Atlas VPN found that 40% of startups globally experienced 40% and more revenue decline due to the Covid-19 pandemic.

Atlas VPN Investigation gathered information from a study conducted by Startup Genome, a research and policy advisory company.

To gain insight into the effects of Covid-19 on the startup sector, Startup Genome surveyed representatives from more than 2000 startups worldwide. This survey covered a range of startups from travel and tourism to Edtech and more.

There is no denying that the impacts of global pandemic have been far-reaching across the different industries.

The report found that a large number of startups lost more than 40% in revenue decline due to Covid-19.

‘”Over 7 in 10 startups saw their income drop since the start of the pandemic. On average, startups saw their revenue diminish by 32%. As many as 4 in 10 startups saw their revenue decline by 40% or more.”

A decline in revenue can result in a a startup reaching the ‘red zone’.

“Decreased revenue is an issue for most startups since they are in a so-called “red zone”. Meaning, they will go bankrupt if they do not raise capital during the next three months, and their revenue stays the same or declines.”

South Africa

Globally the sector experienced and overall delcine in revenue. There was a difference in decline of income for startups varying from country to country.

Asia suffered the most with a 39% decline in overall income for startups. Following suit, startups in Africa saw an overall 36% crash in income.

“North America is close to the global average, with an average new company experiencing a decline of 31% in earnings. South Africa saw a similar decline, with a 32% drop in revenue.”

Startups based in Oceania and Europe faired the best against the impacts of Covid-19. ”New projects in Europe experienced around 27% drop off in income, while those in Oceania suffered a 25% decline.”

Tech startups

The tech sector was not invincible to the pandemics impact but compare to other sectors, the revenue decline was notably less.

Overall, the report recorded the following:

  • Medtech and medical devices : 43% decline
  • Governmental tech : 42% decline
  • Edtech: 26% decline
  • Blockchain and crypto : 14% decline

Notably both Edtech and Blockchain and crypto had a significantly lower decline in income when compared to travel and tourism that experienced a 70% decline.

“In contrast, new projects in the blockchain and crypto industry held up the best, with an average decrease in revenue of 14%. Businesses in this market create products and services related to blockchain technology or cryptocurrencies.”

Read more: Covid-19: Do’s and don’ts for contact tracing by employers

Read more: Government interventions for entrepreneurs around Covid-19

Read more: Covid 19 funding available to SA small businesses [Infographic]

Featured image: Ibrahim Rifath, Unsplash



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