About half of Canadian East Coast startups say they are feeling the financial impact of the COVID-19 crisis, according to a new survey from Halifax-based early-stage venture capital firm Concrete Ventures.
Of the East Coast startups surveyed, nearly 16 percent reported laying off staff.
The survey heard from 117 respondents, and looked at the economic impact of the crisis as it pertains to fundraising, sales and marketing, and runway for startups in the region. Survey respondents were divided into three categories: pre-revenue, early-stage, and established startups.
“COVID-19 is an unprecedented crisis for startups in Atlantic Canada, as it is for many startups around the world,” said Patrick Hankinson, partner at Concrete Ventures. “For some, this has created new opportunities but others are facing difficult challenges. Yet the East Coast startup community remains resilient. I am confident that we will get through this crisis.”
The survey found that 52 percent of pre-revenue startups, 49 percent of early-stage startups, and 53 percent of established startups indicated they are feeling the impact. This survey was conducted around the same time an April report from the Business Development Bank of Canada found that 90 percent of entrepreneurs across Canada were feeling the impact of the pandemic.
Throughout the country, a number of startups have decided to let go of staff due to COVID-19. On the East Coast, nearly 16 percent of respondents reported laying off staff, according to Concrete Ventures’ survey. Of those layoffs, 63 percent came from early-stage startups, 31 percent from pre-revenue startups, and six percent from established startups.
In response to these sudden widespread layoffs, the federal government has made several relief programs available to Canadian businesses. However, Concrete Ventures’ survey found 17 percent of Atlantic Canada startups indicated their business is not eligible for any of these programs. The firm highlighted pre-revenue startups as being particularly “left out” of these programs.
The federal government’s 75 percent wage subsidy, which is aimed to help businesses retain staff, has specific revenue-based eligibility requirements. Although the government relaxed some of these criteria in early April, some members of the tech community have highlighted that pre-revenue startups would still be ineligible for the program.
The financial impact of COVID-19 has also resulted in many startups cutting sales and marketing costs during the crisis. Concrete Ventures’ survey found that 73 percent of early-stage and 93 percent of established companies on the East Coast have cut sales and marketing expenses, and noted that these numbers are expected to impact growth over time.
Concrete Ventures also noted that COVID-19 has dimmed prospects for overall startup growth this year. For pre-revenue startups, 50 percent are expecting flat or declining growth in 2020, compared to 27 percent of early-stage startups and 25 percent of established startups.
“The crisis has also had a significant impact on funding decisions, with many investors moving to bolster their established investments rather than investing in new companies,” Concrete Ventures said.
Seventy-four percent of pre-revenue East Coast startups indicated they have less than nine months of runway compared to 53 percent of early-stage startups and 50 percent of established startups with less than nine months of runway.
“In terms of additional support, the top three requests coming from the survey centre around raising capital, sales [and] marketing, and runway extension,” Concrete Ventures said. “All three of these requests show that entrepreneurs, while optimistic, are still cautious about what lies ahead.”
Image source Unsplash. Photo by Ruth Troughton.