Nordic Tech Startups face cutting staff numbers, with falling sales and a lack of funding amid the Covid-19 pandemic, according to research from Danske Bank.
These job cuts are inevitable as sales slow amid the pandemic and investment capital dries up. For many entrepreneurs, this will be the first time they have faced such financial challenges, said the research report.
“The survey shows that the biggest and most pressing concern [for startups] is declining sales in general, which trigger a lower revenue,” said Danske Bank. “In addition, business owners are particularly concerned about the current and future funding opportunities and the risk of them as founders having to staff down among their employees.”
A total of 468 startups in Denmark, Norway, Finland and Northern Ireland were questioned. Most startups surveyed (81%) expect income loss during the current crisis. Over a third (37%) questioned by the bank expect to lay staff off, found the survey, which was done with Nordic startup portal The Hub.
Danske Bank also said many of these businesses will require advice on how to deal with the crisis because it will be the first time many have had financial problems and lack experience of dealing with it.
“For many startups, this is their first time facing a financial crisis, and therefore their experience to draw on is zero,” said Klavs Hjort, head of growth and impact at Danske Bank. He said many of these companies are solely dependent on founders for decision making, and that many do not operate with the assistance of professional specialists.
“In many cases, their financial situation is already fragile, so liquidity shifts – even though for just a few months – can be critical,” said Hjort. “Finally, the opportunity to raise venture capital may be limited during an economic crisis, with investors focusing primarily on their existing investments.”
The tech startup sector is important to Nordic countries, where some of the most successful companies in this sector have emerged and gone on to be global giants. Danske Bank said the region must ensure the environment in the Nordics, often seen as ideal for tech startups, is retained after the current crisis is over.
“We need to make sure the crisis in relation to Covid-19 does not remove the basis of existence for these companies, intended to secure growth and jobs in our society both now and in the future,” said Klavs Hjorth.
Recent research from startup network Tech London Advocates, part of the Tech Global Advocates network, found that London-based tech startups are equally concerned.
The survey revealed that 53% of tech startups in London are establishing business models for the next quarter with a focus on survival.
A stressful time
Russ Shaw, founder of Tech London Advocates, said it’s a very stressful time for the entrepreneurs and teams running these businesses.
He said the focus for many at the moment is saving, conserving and managing cash. “We don’t know when we are going to get through this situation, so everything is about ensuring they can operate in the coming months so their businesses are viable when we emerge from this challenging period.”
Shaw added that most startups will be speaking to their investors and getting advice about what they should be doing.
On a more positive note, he said the tech startup industry could prove its worth during the current challenges. “There is some underlying optimism that when we come out of this, the digital and tech world, and the things it can offer, are going to become even more important and critical,” said Shaw. “I don’t think we will go back to the way we have operated in the past.”