Corona and the Consequences for Start-ups

The economic crisis caused by coronavirus penetrates almost every industry. And for many new or young start-ups on the market, it quickly becomes a fight for existence. But there are also positive examples.

Start-ups should analyse the situation during the crisis and develop measures as a team. Photo: Shutterstock – Rawpixel.com

“Many of the young companies will not survive the effects of this crisis unscathed. Therefore, there will inevitably be a massive death of start-ups in Germany.” Jens Vestewig, Head of Sales at the start-up Serinus, which specializes in products and solutions in the field of alarm and crisis management, isn’t alone in this assessment. The negative impact on young companies due to the economic crisis triggered by the corona pandemic was already predicted by the Federal Association of German Start-ups at the end of March. In a survey of around 1,000 start-ups in Germany, 91.1 percent stated they were affected by the negative economic impact.

Association President Christian Miele saw the start-up scene’s ecosystem in danger and appealed to politicians to adapt state aid to the specifics of these companies. At the beginning of May, a two-billion-euro aid package was put together, explicitly aimed at start-ups that had previously slipped through the cracks because they weren’t yet big enough but had too many employees to be entitled to emergency aid. For Vestewig of Serinus, one thing is certain: “The innovation engine of the German economy will inevitably be stalled if the state doesn’t launch simple support and aid programs quickly and straightforward.”

Dr. Florian Petit, co-founder of Bilckfeld. Photo: Blickfeld

As in the economy in general, not every company in the start-up scene is equally affected by the crisis. Young companies in the tourism or food industry were among the most promising sectors for start-ups, along with IT, health, automotive, and media and marketing (artificial intelligence). In the crisis, the cards are being reshuffled. In general, it can be said that lack of sales, as well as medium to long-term consequences, such as lack of investment in product development, are causing “strategic changes in the industry”, according to Dr. Florian Petit. The co-founder of Blickfeld, a start-up company that has established itself with scanning LiDAR systems and detection software for environmental perception in the fields of autonomous traffic, mapping, robotics, and smart cities, sees the start-ups as essential for economic stability – not just in Germany. “Start-ups are our future. They enable important developments in many industries and are often part of the vanguard of digitization.”

In the current situation, according to the head of Blickfeld, his company has to react to project postponements due to customer requirements. Nevertheless, due to a financing round concluded shortly before the crisis, the start-up company is in the fortunate position of being able to continue to pursue long-term projects. “We are proceeding with determination and without restrictions: We are continuing to work on the development of sensors and software as well as the establishment of our production line. In the two months of April and May, we even hired 18 new employees!”

The situation is also rather positive for Serinus. With their communication platform, which provides users with an overview and fast options for action in emergency or crisis situations such as natural disasters, production downtimes or disruptions, or cyber attacks, they are even benefiting from the crisis. “Corona has shown many companies and public institutions that they’re not sufficiently prepared for unexpected critical events. As a result, the demand for software-supported information and crisis management tools will increase in the future,” reports Vestewig. For Serinus, the success story continues. In 2019 the young company won the DEKRA Award in the then newly introduced “Start-up” category. The DEKRA Award, which is organized jointly with the WirtschaftsWoche magazine, honors pioneering top performance in the field of safety.

Vestewig and Petit advise industry colleagues affected by the crisis to focus on their own strengths and analyze the situation as soberly as possible. Instruments such as government aid programs or short-time work should be used to reduce costs. At the same time, it’s important to establish close contact with existing investors in order to jointly develop measures to compensate for lost sales and secure the company’s continued existence.