The impact of Covid-19 on entrepreneurial ecosystems

Abstract

Entrepreneurial ecosystems are the ‘fertile soil’ in which start-ups and in particular scale ups emerge. But there is concern that they are being undermined by the COVD-19 pandemic, with potential adverse impacts on entrepreneurial activity. First, the likely cascade of failures may discourage risk taking (but it can equally be argued that high unemployment will stimulate people to start businesses). Second, key infrastructure - such as coworking space, accelerators and incubators may close, the financial challenges of their clients undermining their own financial viability. There will be a lack of seed and start up finance as investors focus on their existing investments. Third, fewer exits and at lower valuations will weaken entrepreneurial recycling processes. And ongoing social distancing will reduce the effectiveness of personal relationships (mentoring, pitching, networking, etc) that are so critical for learning and knowledge transfer. Moreover, it is the smaller and less well developed ecosystems in smaller cities outside of the economic core regions that are likely to be impacted to the greatest extent, further widening geographical disparities.