Less than 20% of startups have cash to sustain operations amid COVID — survey

MANILA, Philippines — Less than 20 percent of startups in the country have enough cash to sustain their business operations for more than a year amid the impact of the coronavirus disease 2019 or COVID-19, highlighting the need for government support, according to a survey from PwC Philippines.

PwC Philippines’ 2020 Philippine Startup Survey: COVID Edition presented via a webinar was conducted from April 12 to 26, and covered 90 startup founders in the country.

The survey showed 19 percent of startups have cash good for over 12 months, while only 17 percent have the ability to sustain the business for more than 12 months if the enhanced community quarantine (ECQ) is extended.

The ECQ has been in place in Metro Manila since March 17 and will last until May 15.

After May 15, Metro Manila, Laguna and Cebu would be under modified ECQ until May 31.

As majority of startups have limited cash, 64 percent of the startup founders said they need up to P5 million worth of additional funding to help normalize operations.

In particular, the additional funding would be used for working capital requirements, technology improvements, and salaries of potentially new employees.

While there have been no final announcements on government grants or subsidies, majority or 64 percent of the startup founders said they intend to secure such within the next three to six months.

Meanwhile, 43 percent plan to secure additional funding through equity financing and 29 percent would be tapping banks for loans.

In terms of support government could provide, 71 percent of startup founders said loans with a longer grace period and relaxed credit terms would be a big help.

Startup founders said other forms of support government could provide are tax incentives (66 percent), incentives to startup investors to help accelerate fundraising activities (60 percent), equity financing (53 percent), and wage subsidies (42 percent).

Trade Undersecretary Rafaelita Aldaba said the government is determined to help mitigate the adverse impact of COVID-19.

“We are mobilizing our resources to ensure business continuity and recovery throughout this pandemic and beyond. We wish to reassure our startup community that your government will provide needed assistance to help you get through these unusual times. We also hope that our partners from the private sector will continue contributing to these efforts aiming to revitalize our nation’s economy,” she said.

Apart from financial assistance, startups said access to customers (76 percent) and access to talent (61) percent are among the considerations for a sustainable business after the ECQ is lifted.

During the ECQ, 51 percent of startups have reduced their level of operations, while 49 percent also started offering a new product or service.

“Some startups are thriving in this new environment, particularly those in grocery and fresh vegetable online delivery, and those working with the Department of Health and other government agencies to assist in implementing their programs. We are witnessing the birth of a new world,” Rene “Butch” Meily, president of QBO Philippines, IdeaSpace Foundation and the Philippine Disaster Resilience Foundation said.