This week, Nigeria tech startup Andela sent home 135 of its employees as the software company reels from the impact of COVID-19. This appears to be the trend as companies fight to stay up amid tough economic times occasioned by the health pandemic.
But a survey report by Startup Genome warns that these lay-offs, and the possibility that many startups may die off, could have a major impact not only on the startup industry but the broader economy.
As it is, many governments have instituted measures aimed at cushioning companies and businesses, including offering tax breaks and advancing loans to startups.
But the Startup Genome survey shows that more needs to be done if we are to save the startups. According to the firm, any worsening of the coronavirus crisis risks many companies, which may have no alternative but to fold up.
African startups could shut down en masse
Startup Genome says that should current circumstances prevail and companies continue to lose revenue at the same expense levels, at least three in every ten startups across the globe will fizzle out by August this year.
The report goes on to state that more damage could be from the shutdowns and lay-offs in the tech industry, more than could be witnessed from job losses in the traditional market.
Per the study, one shut down in the high tech sector will mean governments would need to create even more jobs in the service economy.
The report observes that there could be “ripple effects much beyond [the] startup ecosystem.”
Another report has forecast that African startups could lose as much as $1 billion in potential VC funding due to the current health and economic crises.