Survey: PH startups hit by Covid-19 only have cash up to 6 months

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A new report released by consulting firm Isla Lipana & Co./PwC Philippines (PwC) has revealed that almost half of local startup founders said the Covid-19 pandemic has the potential for significant impact on their business operations, and it is causing them great concern.

The report said 62% say they only have a cash runway of up to six months, and 70% say that they can only sustain by up to six months if the Enhanced Community Quarantine (ECQ) is extended. Yet interestingly, 21% of the founders say that Covid-19 is positively impacting their businesses, with an increasing demand for their products and services.

The study, titled “2020 Philippine Startup Survey: Covid-19 Edition,” asked startup founders about the challenges and concerns brought about by the pandemic, as well as the ECQ in Luzon and other parts of the country.

The survey was done in collaboration with QBO, the Department of Trade and Industry (DTI), and IdeaSpace. The study follows through on a report released in February this year that maps the Philippine tech startup scene.

“These are unprecedented times. We have been surveying the Philippine tech startup ecosystem, tracking its progress, for several years, and conducted this follow-up study to better understand the impact Covid-19 has had on our startup community,” said Katrina Rausa Chan, director of QBO.

“There is an opportunity for tech to help us not only survive, but adapt and transform in this new normal, and we hope insights from this survey can equip us to design interventions to respond to this crisis and ensure that our startups continue to thrive. We can come out of this more resilient, and stronger than ever,” Chan added. 

The report noted, however, that startups are well-positioned to create innovative and tech-driven solutions to respond to the crisis, and are leading the way for digital transformation. 

“Some startups are thriving in this new environment, particularly those in grocery and fresh vegetable online delivery, and those working with the Department of Health and other government agencies to assist in implementing their Programs. We are witnessing the birth of a new world,” said Rene “Butch” Meily, president of QBO, IdeaSpace Foundation and the Philippine Disaster Resilience Foundation.

The growth momentum of Philippine startups over the years may be hampered by a pandemic such as Covid-19, IdeaSpace executive director Diane Eustaquio said.

“One of the biggest challenges they have is the impact on their cash flow. Quite a number of startups were not able to collect from their customers before the lockdown. Even if they get to collect, a recession may slow down projections, which were once very optimistic.”

She remains hopeful, though: “I know many of these entrepreneurs, and they are resilient. I have no doubt many will pivot to survive and as this survey says, a number have already seen the positive effect on their businesses. I believe that they will face this battle head-on. I hope that decision makers, both in the public and private sectors, are paying attention to what the startups need, as they can be instrumental in addressing the needs and challenges that we face in this new normal.”

DTI undersecretary for competitiveness and innovation Rafaelita M. Aldaba said the government is determined to mitigate the adverse impact of Covid-19 on people’s well-being and the country’s enterprises.

“We are mobilizing our resources to ensure business continuity and recovery throughout this pandemic and beyond. We wish to reassure our startup community that your government will provide needed assistance to help you get through these unusual times. We also hope that our partners from the private sector will continue contributing to these efforts aiming to revitalize our nation’s economy,” said Aldaba.

“Through the Filipino’s creative, adaptive, and resourceful entrepreneurial spirit, we believe that we will be able to thrive in the changing market environment disrupted by Covid-19,” she stressed.

Alexander Cabrera, PwC Philippines chairman and senior partner, is optimistic that the Philippine startup ecosystem will survive the pandemic.

“Our country has creative and agile entrepreneurs. In fact, according to our survey, 49% of the founders started offering new products and services to adapt to the consumers’ needs. With the proper guidance and support from both the government and private sector such as grants, financing, and incentives, our startups will get through this,” Cabrera said.

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