Start Up Emergency Fund: To exist or cease to exist, startups’ race against the clock
Globally, startups are having a hard time with local and global economies still frail from lockdowns, and restrictions brought about by the pandemic. Startups often rely on funding meaning they are likely to be impacted. Before Coronavirus, it was estimated that 90% of startups fail yearly. Okay, of course, this is attributed to many factors. However, with the crisis impacting all fields and people extinction could be aggravated.
The Swiss Re startup fund for startups has been there to support the diverse startups in Aiducation Kenya, with many beneficiaries in its 6 years of operation. According to the Start-Up Fund Manager of Aiducation International Kenya, Peter Safari, many startups in the fund’s database were likely running out of cash due to lack of markets, raw material, and capital. For some companies in the fund, salaries are their biggest expense, and layoffs and pay cuts have become stopgaps for survival.
Over the past several days, I’ve spoken to some startup founders in Aiducation, read reports from venture capitalists to better understand the strain startups are facing. A conversation with Jimmy Tune, the founder of the Crosstown Courier Limited in the earlier days of Coronavirus was full of uncertainty on how the company was going to adapt, this reflects on all the startups. Only a few may find themselves in a stronger position thanks to their capacity to adapt and with cash injections from investors.
The startUp Fund developed new funding criteria called the emergency fund, from a triage mode on the pandemic. “This is a fund in a grant form for the startups that have been in operation within Aiducation for at least a year and have been reporting to the office for the last six months,” Safari says. “To support them through this crisis.” This funding allows startups to stay on the runway, operational until the economy picks up. “Unlike a loan offered by the government that requires servicing in a given timeline, our recipients shouldn’t be worried about that when it comes to the emergency fund,” he adds.
And since no one knows how long the pandemic and its economic fallout will last, this fund, therefore, provides a lifeline for startups to be agile in embracing the changing times. This crisis will lead to changes in business models of the said startups for now and in the future.
For example, The Crosstown Courier Limited in response to the current environment, they have decided to adapt and reinvent themselves. Finally, the fate of the startups may now depend on something they can’t control: their last injection of cash.
written by Jimmie Chengo