New research has revealed 40% of start ups saw their revenue drop by at least 40% or more during the ongoing COVID-19 crisis.
According to an Atlas VPN investigation, 7 in 10 start ups have seen their income drop since the start of the pandemic. On average, start ups saw their revenue diminish by 32%, the research found. As many as 4 in 10 start ups saw their revenue decline by 40% or more.
The research revealed that 18% of new companies also saw their revenue plummet, with figures showing declines of anywhere from 61% to 99% since the beginning of the crisis. A significant portion, 7% of start ups, lost all their customers due to the pandemic.
"Sadly, the fact is that to survive, new companies will have to cut expenses, which means that layoffs are inevitable," says Rachel Welch, chief operating officer of Atlas VPN, commenting on the findings.
"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," the research report says.
"Globally, 4 out of 10 startups fall into the category of a red zone, which means that the pandemic is a serious hurdle to them."
The research was performed by research and policy advisory company Startup Genome, who surveyed representatives from more than 2000 start ups globally to discover how the pandemic impacted their business
Changes in revenue by sector
The research found that the level of impact of the COVID-19 crisis on start up revenue varies greatly depending on the industry the company is in.
Not surprisingly, travel and tourism startups were affected by the COVID-19 crisis the most. On average, a startup in this market saw its revenue plummet by 70%.
Moreover, beauty and fashion start ups also experienced a nosedive, losing of 59% in total revenue.
In contrast, the report found new projects in the blockchain and crypto industry held up the best, with an average decrease in revenue of 14%. Close behind follows the cybersecurity industry, in which start up revenue diminished by around 17% since the start of the COVID-19 pandemic.
The research found start ups in the gaming industry also stood the test of the COVID-19 crisis quite well. On average, a new company in this industry saw a reduction in total gains by 19%.