Wednesday, June 19, 2024

Survey Reveals Light At The End Of The Tunnel For Start-Up Founders

A new study by Slush, Helsinki and NGP Capital reveals that startup founders are faring better than expected during the pandemic.

The true impact of the COVID-19 crisis on the start-up ecosystem is revealed in a new report published today by Slush and the City of Helsinki, in collaboration with NGP Capital. The newly published report, “QUARANTINED GROWTH – Founders’ perspectives on the COVID-19 crisis & a Helsinki startup ecosystem deep dive”, surveyed over 330 start-up founders from across the globe. The report reveals unique insights from the ecosystem on the past, present, and future impact of the COVID-19 pandemic from the perspective of the founders themselves.

According to the study, despite the ongoing economic uncertainty runways haven’t drained as feared in March 2020. Most founders have also avoided layoffs, and some even raised their headcount as over a third of the founders surveyed reported an increase in headcount during the pandemic. The impact of the crisis has also treated some founders kinder than others: clear winners have emerged from sectors such as e-commerce, fintech, and education. Those sectors also see the impact of the crisis in a more positive light than others on their business.

Helsinki-based founders have an optimistic view of the future

In addition to assessing the effects of the COVID-19 pandemic, the report showcases how the local Helsinki ecosystem has evolved over the last 7 years. Using Slush data and data from NGP Capital’s Q-platform, the report showcases how Helsinki and its startups have evolved and, in many cases, thrived.

Read More: Does third-party remote access weaken the enterprise network?

“The COVID-19 crisis was a shock to everyone in Finland. In March it looked like investors and founders alike were preparing to shield their companies from the storm. But the realization was surprising – according to founders, the impact of COVID-19 has been less negative than initially thought. Founders have for the most part avoided large layoffs, and runways haven’t drained perhaps as much as one could have expected based on Slush’s March survey,” tells Miika Huttunen, the CEO of Slush. “We think this positive development has its roots in our small but strong ecosystem.”

“The unique startup cluster in Helsinki has grown into one of the most significant clusters in Europe. I’m proud that it has the resilience to survive the tough times we are experiencing,” comments Jan Vapaavuori, the Mayor of Helsinki.

“As an international investor with offices in China, Europe, and the US, but with deep Finnish roots, we are thrilled to see the growth and maturation of the Finnish startup ecosystem. We now see similar big rounds of financing in Finland, especially in the Helsinki area, as elsewhere around the globe. Helsinki is becoming increasingly interesting for international investors like us because of the talent found here, the expanding ecosystem, the proliferation of growth-stage tech companies, and more local venture capital investors.  I can’t wait to see what 2021 brings,” says Bo Ilsoe, Partner at NGP Capital who acted as data partners for the study.

Read More: Role of Innovation Teams During and Post COVID-19

Key findings from the study

  1. The initial shock of the coronavirus crisis was apparent in Slush’s March survey. 50% of the founders surveyed reported less than 6 months of runway and 47% had either halted recruitment or were executing layoffs. At the same time, 46% of investors reported an increased focus on their existing portfolio companies, exposing a lot of early-stage ventures to a lack of capital to keep their operations running.
  2. When asked to look back six months, 50% of founders surveyed expected a large or moderate negative impact from the virus, and an additional 29% expected neutral impact at best. Today, 30% of founders we surveyed have seen large or moderate positive effects, while an equal 29% have seen neutral effects. Especially industries like e-commerce, fintech, and education have strived in a digital-first environment.
  3. Funding still seems to currently be a key problem for founders. While not a huge change to the 50% reported in March, the situation certainly hasn’t improved for the better as 55% of founders now report a current runway of less than 6 months. 35% of founders are now less optimistic about their access to capital than 6 months ago.
  4. Compared to the 47% of founders who had halted recruitment or were executing layoffs in March, 20% have executed layoffs and 38% have been able to increase their headcount.
  5. In times of adversity, local communities have been an asset to founders. A majority of founders have been satisfied with their local ecosystem’s efforts, especially in the Baltic-Nordic region outside Finland and in Helsinki. Support through ideas, mental support, and building connections in a time of loneliness have been especially valuable.
  6. The founders in our home ecosystem of Helsinki had an especially negative view of the effects of the coronavirus crisis, as 57% were expecting a negative impact. While 49% of Helsinki-based founders feel that the actual impact has been negative, the ecosystem has shown resilience through tough times as 80% have avoided layoffs. In addition, there is hopefulness in the capital markets: 40% of Helsinki-based founders are more optimistic about the capital landscape than six months ago.
  7. In a broader historical perspective, the Helsinki startup ecosystem has grown up, and it has grown with purpose. Compared to the European average, Helsinki hosts substantially more companies that have been built with a purposeful mission.
  8. While the coronavirus crisis isn’t certainly over, the level of optimism is rising as a majority of founders agree: we are in a better place now than we were six months ago.

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