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April 23, 2020

UK start-ups struggling to survive amid COVID-19, finds proSapient research

More than half of UK start-ups, at 57%, have enough cashflow to survive a maximum of six months amid the prevailing COVID-19 crisis, even after carrying out cost-cutting measures, found a new survey from proSapient.

ProSapient research says that UK start-ups are struggling to survive due to COVID-19. (Credit: StartupStockPhotos from Pixabay)

More than half of UK start-ups, at 57%, have enough cashflow to survive a maximum of six months amid the prevailing COVID-19 crisis, even after carrying out cost-cutting measures, found a new survey from proSapient.

The machine learning executive research platform carried out the survey on founders and c-suite executives from 277 start-ups in the country. Of these, nearly half of respondents work in the software and services, technology hardware, and professional services sectors, which have a combined valuation of about £4.1bn.

The findings from proSapient showcased that the lack of support from the UK government during the COVID-19 outbreak has resulted in a very real risk that a generation of innovation and economic productivity could end up being history.

Owing to COVID-19, the surveyed UK start-ups are currently anticipating revenues to drop 47%. According to the executive research platform, there is a split of revenue impact, with several start-ups presently facing some positive effect on revenues because of their digital products, social impact, or ability to help in the prevailing environment.

In contrast, a quarter of respondents expect a decline of over 75% in their revenue due to COVID-19.

When it came to employment and productivity, the survey found that the immediate effect on the start-up community is notable, with the respondents confessing that nearly half of all employees will be furloughed by the end of this month.

Over half of funding, at 56%, of British start-ups has been found to have come from private individuals. This is in comparison to 18% from venture capital and private equity funds, and just 15% from other sources such as government and public markets, while 11% was from EIS funds and venture capital trusts.

ProSapient co-founder Jordan Shlosberg said: “The current environment is extremely challenging for UK start-ups, a sector which employs over 330,000 people in the UK according to Crowdcube. Revenues, productivity, runway, and employment have been hit. The majority of entrepreneurs relief has been withdrawn.

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“Start-ups are largely ineligible for the government-backed bank loans. And most founders have already bet the majority of their personal wealth on their businesses and are in no position to use any remaining assets as collateral to access further funding.”

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