At the time of this writing, COVID-19 (aka Coronavirus) has infected more than 525.000 people and has killed more than 23.000.
Two students at Carnegie Mellon University developed Covid Visualizer to provide a simple, interactive way to visualize the impact of COVID-19. You can check each country or territory to see cases, deaths, and recoveries.
China’s experience so far shows that the right policies make a difference in fighting the disease and mitigating its impact through containment, but at a significant economic cost.
Coronavirus is having a profound and serious impact on the global economy, public markets and leading corporations.
The S&P, FTSE and Dow Jones Industrial Average have all seen huge falls since the beginning of the year.
And because of that, central banks in several countries have cut interest rates trying to encourage spending, and of course, to boost economy.
Travel and tourism industry is having an enormous impact, ranging from hotel and cruise ship quarantines to airlines halting flights in some regions. According to the World Travel and Tourism Council (WTTC), the sector could shrink by up to 25% in 2020.
For example, the USA travel and tourism industry could lose at least U$S 24 Bn. in foreign spending this year because of the rapidly spreading coronavirus and up to 50 million jobs could be lost in the industry worldwide because of the pandemic.
One of the well-known Venture Capital firms in USA, Sequoia Capital, sent a memo to the portfolio companies advising them to prepare for the worst.
It refers to Coronavirus as “the Black Swan of 2020” and give founders & managers some insights of the challenges that companies in frontline countries are facing:
- Drop in business activity.
- Supply chain disruptions.
- Curtailment of travel and canceled meetings.
It also advise the portfolio companies to “question every assumption about your business.”
- Cash runway. Do you really have as much runway as you think?
- Fundraising. Private financings could soften significantly, as happened in 2001 and 2009.
- Sales forecasts. Even if you don’t see any direct or immediate exposure for your company, anticipate that your customers may revise their spending habits.
- Marketing. With softening sales, you might find that your customer lifetime values have declined, in turn suggesting the need to rein in customer acquisition spending to maintain consistent returns on marketing spending.
- Headcount. Given all of the above stress points on your finances, this might be a time to evaluate critically whether you can do more with less and raise productivity.
- Capital spending. Until you have charted a course to financial independence, examine whether your capital spending plans are sensible in a more uncertain environment.
“Having weathered every business downturn for nearly fifty years, we’ve learned an important lesson — nobody ever regrets making fast and decisive adjustments to changing circumstances,”
Sequoia Capital`s Memo
And of course that after the Sequoia Capital memo founders all around the world are, understandably, freaking out. It’s hard enough to raise money in a healthy economy, let alone when the stock markets are tanking globally.
It’s obvious that VCs will not stop investing, but it’s also true that VCs will become more selective on their deals, they will take a bit more time to get to know and diligence the business, and the “investing grade bar” will be higher.
According to CB Insights forecasts, funding will slow down during the next quarters, with some even feeling that “disinvestment” will be heard more often in the countries that have been hit hardest.
Due to the lockdown of Universities, support offered by academic accelerators and incubators will be off the cards.
Public grants and funding from national and supranational organisations may be a more stable route to follow.
For example, the French government has announced a U$S 4.3 Bn. plan to support a startup ecosystem struggling to survive the COVID-19 pandemic that has shut down the nation’s economy.
Startups will also need to focus on their own sustainable model and bootstrap. Most of them will need to find a way to keep on growing even if they can’t access fresh capital.