How will the Covid-era startups perform post-pandemic?
Ritam Gandhi, Founder and Director, Studio Graphene shares with Business Leader his analysis of what we can expect to see from the thousands of start-up businesses that were created during the pandemic, as the UK looks towards a post-Covid future.
Even with the clarity of hindsight, it is difficult to look to the broad economic devastation since the onset of the pandemic 18 months ago and find any silver lining. Businesses across sectors were burdened by an unprecedented upheaval in consumer access, significantly altered, reduced, or disappeared revenue streams, and the urgent need to concentrate resource allocation on only the elements of their operations which were most conducive to short-term survival.
Indeed, for many the challenge proved too much. ONS figures revealed that in 2020, nearly 400,000 business closures were recorded. Even as the worst social and economic impacts of the pandemic start to recede into the past, it is anticipated by the Federation of Small Businesses that around 250,000 further businesses will close throughout 2021.
Despite this rocky period for businesses, the picture is not dominated by gloom. Further data from the ONS has demonstrated the reality of a once-anecdotal trend: the Covid-inspired startup boom. In fact, more than 400,000 new businesses were formed in 2020. There are a number of factors underpinning this. Naturally, with high levels of redundancy measures, and uptake of the furlough scheme, many were left with time on their hands to develop and pursue their ideas. Others will have felt incentivised to launch a side hustle to reduce their dependency on the fortunes of their employer; while others will have seen an unexpected gap in the market afforded by the social changes under national lockdowns.
With the pandemic now abating, and most social restrictions lifted, it will be intriguing to see how these Covid-inspired startups will fare as the economy returns to normality.
To this end, Studio Graphene commissioned a survey of more than 2,000 UK adults to uncover how businesses started in the last 18 months met the unique challenges of a pandemic economy, and how they plan to scale going forward. Of those surveyed, 15% said they had started a business during the pandemic, while a striking 72% of those who did said it had since become their main professional focus.
Rising to the challenge
While many established enterprises struggled with the urgent need to translate their operations and offering to digital platforms, new businesses were able to launch to specifically cater to these requirements.
More than half (57%) of those who started a business said their startup was created as a solution to a new problem created by Covid-19, highlighting the plethora of opportunities at hand for enterprising individuals. Six in ten (60%) felt that the social restrictions implemented as a result of the pandemic had made it easier to dedicate their time to their new business, while nearly as many (58%) felt that in the current economic climate they would prefer to manage their own business rather than depend on an employer.
Clearly, the pandemic stirred up a perfect marriage of necessity and opportunity for entrepreneurs to capitalise on – though naturally, as is the case with starting a business under any conditions, this has not come without its share of teething issues.
A majority (60%) of respondents felt a lack of financial investment had hampered their efforts to get their startup properly off the ground; while only 54% had taken advantage of government support schemes to plug funding gaps.
This limited access to support is a critical challenge faced by most startups during the pandemic. In fact, many founders (59%) reported feeling that the UK government had prioritised supporting larger established enterprises, instead of helping high-potential emergent startups to scale.
The relevance of digital
Crucially, alongside issues with financing, many of these startups (55%) report that a lack of tech skills had held back their business since its launch. It goes without saying that, given the rise of digital platforms as the primary mode of attracting and managing customers and clients, that businesses with access to adequate digital products and tech development will have been best-placed to take advantage of their perceived gaps in the market.
Positively, a majority (58%) plan to enlist the help of a digital agency or support with IT infrastructure over the next year to aid the ongoing scaling of their business. While nearly six in ten (58%) had used social media platforms to build brand awareness and market their offering, these platforms have limited application in many instances. Hopefully, when armed with greater tech and financial support as we emerge from the pandemic, social platforms can be used to complement the overarching strategy and generate interest and conversions surrounding the business.
It is particularly encouraging to note that 56% of founders are planning to recruit more people to their business over the coming year; painting a picture of a robust UK startup culture with cause for optimism looking ahead. Naturally, with limited financial and tech resources at hand, and consumer trends continuing to shift radically, question marks were raised about the enduring relevance of many ideas which thrived under pandemic conditions. It’s positive to see that most founders are confident in the longevity of their business, with more than half (55%) even planning to invest in a dedicated physical workspace over the coming 12 months.
That so many entrepreneurs have scaled their business to become their priority, and are looking to expand their potential with top-class tech and more staff signals the health of these businesses. In turn, startups and scaleups must be afforded every possible opportunity to take advantage of the potential of digital; government support in levelling up tech facilities and affording greater access to skills development opportunities will be a critical step in helping these businesses become sustainable in the long-term.