How COVID-19 Can Fuel The Next Generation of Fortune 500 Companies

Day-to-day struggles of startup founders

It’s ok. We get it. Life right now is pretty bleak.

With most of us stuck between four walls (are the kids having fun yet?)  and the economy taking a once-in-a-lifetime beating, it’s easy to get lost in the doom and gloom of today. 

We are all longing to return to better days where black swan events where a myth and seed-stage funding wasn’t so hard to come by. Oh, how the times have changed. And at what pace. In the beginning of the year, our biggest concern was whether or not we could make it to the end of dry January. Nowadays, everyone could use a drink. 

Some of us still remember the impact of the crash of 1987 and the dot-com bubble burst of 2000, along with the most recent financial fiasco in 2008. These events have left its scars on not only Wall Street, but everyday life in general, affecting the everyday life of people around the world. Today, we are seeing a similar situation starting to emerge with Covid-19. The first signs of a recession are already in sight, and venture capitalist deals are starting to decline rapidly, leaving many startups without any form of funding - and therefore, any form of a future. 

Worldwide VC Statistics during covid

In this article from the Next Web, JF Gauthier - Silicon Valley serial entrepreneur and founder of Startup Genome - mentions that startups in China, the epicentre of Covid-19, are already seeing the effects of the coronavirus, experiencing a 50% drop in venture capitalist funding. 

“If a drop like that happens globally,” explains Gauthier, “even for just two months, approximately $28 billion in startup investment will go missing in 2020, with a dramatic impact on startups. 

Many startups will be unable to raise a new round of funding. It’s difficult to assess how big of a percentage of startups will fail, but with startups needing to raise money every 12 to 18 months with three to six months worth of cash at closing, a six-month drought in VC deals could wipe out a large portion of startups.”

Sharing Gauthier’s concern is cbinsights.com, who released an insightful report on how Covid-19 could impact seed-stage startup investing. In their forecast, the intelligence platform projects a whopping decline of 22% of seed-stage funding in Q1’20 compared to Q4’19. This decline is partly caused by angel investors and smaller VC’s sitting on the sidelines in times of economic uncertainty. 

The positive side of the pandemic

Are you still with us? Good, because here comes the silver lining. More often than not, history shows us that in the midst of adversity, opportunity emerges. For example, did you know that about half of the Fortune 500 companies began their business during a recession or bear market? During the last recession of 2008, companies like Airbnb, Slack, Pinterest, WhatsApp, Square and Uber have opened their (car)doors, paving the way for the next generation of Future 500 heavy-hitters.

Reaffirming this unique opportunity is this research study from the Ewing Marion Kauffman Foundation, which mentions that “challenging economic times can serve as the rebirth of entrepreneurial capitalism.” This claim is supported by three main findings:

1. Recessions and bear markets might lead to short-term declines in business formations, but they don’t necessarily have an impact on the formation and survival of new founded business. 
2. More than half of the companies on the 2009 Fortune 500 list have begun their business during a recession or bear market. 
3. The creation of new jobs at startups proves to be less volatile and sensitive to economic downturns than job creation in the overall economy.

Another promising glimpse into the future of early stage startups is provided by Entrepreneur contributor Hamza Mudassir, who mentions that “Covid-19 will fuel the next wave of innovation,” and believes this pandemic will shape business for decades to come. 

Conclusion

These insights might seem a bit overwhelming, but we are here to guide you through these unprecedented times. At Pitchdrive, we aim to connect the most promising startups with relevant investors, so you can focus on what you do best; grow your business.

We make funding accessible, fast and simple for founders whom we believe in, and take the guesswork out of the search for qualified investors. This way, funding only takes days instead of months, enabling you to secure your future in the midst of a pandemic. 

Sign up now, free of charge, to start your journey. Our Startup Qualification Manager will get back to you in no time with a professional business review. If you’re accepted into our program, we’ll start connecting you to relevant investors for you. 

Future 500, here we come.