We may be a few months into the “Black Swan” of 2020, but it is still not possible to fully predict the impact of COVID-19 on startups in Southeast Asia or beyond. However, the longer travel restrictions remain in place, and the longer people remain conservative in their spending, the harder some industries will find it to recover.
Globally, countries are facing the difficult challenge of protecting their people during the pandemic, while also trying to limit the damage to their economies. So how are the countries in Southeast Asia faring? Are regional startups taking a big hit, or are they managing to weather the storm? We take a look at the impact of COVID-19 on some of the startups of the region.
Job losses and closures
Already, some startups in Southeast Asia have had to lay off staff or close up shop altogether, as the pandemic has spread through the region. While food and beverage and travel are probably the most affected sectors, startups across all industries are impacted by the lockdowns and restrictions caused due to the pandemic.
For example, Singapore’s Zilingo has had to reduce its workforce by letting go over 40 staff members, mainly from its headquarters. This is a significant blow to the company, which has also had to shelve plans for further expansion. Zilingo is focusing all of its resources in the local market in an attempt to survive and sustain.
If successful startups like Zilingo, who have brought in VC funding $226 million USD in 2019, and Traveloka, reportedly worth $4.5 billion USD, are suffering and having to reduce their workforces, how are smaller startups going to survive?
Unfortunately, the answer is—some won’t. Food and beverage industry supplier Stoqo Teknologi Indonesia is one of the first significant casualties of these hard times. The online platform has had to close with the loss of around 250 jobs due to the downturn in the F&B industry in the country. It is unlikely to be the only startup choosing to cut its losses and close down.
Staying the course
There is some good news, however, with some startups in the region pledging to protect their employees come what may. Companies like Singapore’s Motorist.sg have changed plans from expansion to one of survival for now. By doing this, the company has committed to sustaining its 40+ employees and not cutting wages, with some help from the Singaporean government’s 75% wage subsidy scheme and generating income online.
In Indonesia, homegrown coffee startup Kopi Kenangan is doing its bit to ensure the security of jobs within the firm. To manage this, CEO Edward Tirtanata has taken a wage cut and will receive a salary of virtually $0 USD (1 IDR) and is pumping over $1 million USD (15 billion IDR) into a support fund for staff and frontline workers. They have recently secured $109 million USD in series B funding to help with its continued growth and support initiatives.
Recognising that people are Loship’s greatest asset, CEO Nguyen Hoang Trung has also committed to not firing staff or reducing wages during the pandemic. This Vietnamese one-hour delivery company was on track to become a unicorn before COVID-19. The startup has cornered 12% of the food delivery market in Vietnam and also provides other services such as laundry delivery, courier services and eCommerce, all proving popular during this time of restricted movement.
Similarly, in Malaysia, the aggregator eCommerce platform iPrice Group is looking after its workers with the help of upper management taking pay cuts of up to 25-40%. Meanwhile, in the Philippines, environmental power supply company Star 8 Green is also paying full wages and offering assistance to staff who have been impacted by the pandemic.
There are still very tough times ahead for startups in Southeast Asia. Fragile and developing economies will struggle to pull themselves out of the mire after the virus has subsided. Some startups won’t survive the impact of COVID-19, and it is pertinent to expect others will close or downsize.
While the region readjusts in the coming months, the companies who have implemented cost-saving policies or have pivoted to a more pandemic-friendly structure should be able to continue to develop and evolve. Many of their futures may rely on government support and VC investments, but with strategic and adaptive business moves, hopefully, most will survive.