As a global recession looms, many businesses find themselves facing an existential crisis. The coronavirus pandemic has signalled an end to a period of untrammelled economic expansion, triggering a sharp rise in unemployment and forcing governments across Europe to introduce sweeping business bail-outs in a bid to stem the tide of insolvency.
Hard times lie ahead—and yet, it’s not all doom and gloom. With European policymakers’ attention firmly focused on getting the bloc’s economy back on track via a recovery plan designed to accelerate digital and green transitions, the crisis could, in fact, herald the beginning of a golden age of opportunity for Europe’s startups.
The US and Asia enjoyed a significant head start in the startup boom. However, Europe has been steadily catching up—and is predicted to snap back with greater resilience from the pandemic. Not only did Europe bring the pandemic under control far faster than the US, but Europe’s existing social welfare system, together with its governments’ collective approach to preserving jobs during lockdown, rather than allowing unemployment to soar, are paying dividends.
While returning to ‘business as usual’ will be tough, evidence from the last global financial crash proves that crises drive innovation. Figures show that after 2008, more investors took chances on seed-stage funding rounds, for example, a trend that may be repeated as newly unemployed entrepreneurs create startups – both as a way of beating unemployment and solving pressing social problems.
A skilled workforce awaits these newly formed businesses: European startups can expect to attract talent either laid off in the US or barred from the country after Donald Trump’s crackdown on visa rules. Companies who are ready to hire could quickly see their stock rise, thanks to this unprecedented talent pool.
Tech startups in the ascendant
Some European startups are especially poised to grow in the wake of the crisis. Take France-based social media platform Yubo, whose founders featured on this year’s Forbes 30 under 30 list. The company’s goal—of fostering long-distance friendships between young people aged 13-25 through live video streaming and instant messaging—seemed particularly prescient during the pandemic. For young people who have suddenly been forced to drop the in-person socialization with their peers that research has shown is essential to their development, the app has proved a vital resource.
As the lockdowns necessary to slow the spread of Covid-19 shuttered schools, cinemas and concert venues, Gen Zers turned to their smartphones both for social sustenance and to discuss the pressing political issues of the day, with sites like Yubo or Houseparty offering a safe and flexible platform for socializing and debate in a group setting. Yubo’s daily sign-up figures speak for themselves, having more than doubled in number from the beginning of 2020 to reach 30,000 by the middle of April. With uncertainty lingering over when schools in the US, UK and Canada— the countries which make up the lion’s share of Yubo’s userbase—will reopen in full, the popularity of livestreaming apps is likely to grow still further.
Healthtech at the forefront of research
Meanwhile, European healthtech startups – which already had an advantage thanks to the continent’s strong public health systems – are sure to see renewed investment amidst the public health crisis.
London-based Benevolent AI, for example, uses artificial intelligence to identify promising new drug targets and has already identified some potential treatments for Covid-19 which are now being investigated further. Using tech designed to sift through reams of scientific literature referencing the virus, the researchers were able to speedily pinpoint a potential treatment: baricitinib. Originally developed as a way of suppressing the extreme immune-response triggered by conditions such as rheumatoid arthritis, barictinib will soon be tested in an accelerated clinical trial as a potential cure for the overactive immune system response called a cytokine storm which has killed countless coronavirus patients.
Early assessments of barictinib’s effectiveness suggest that Benevolent AI’s algorithms may be right on the money. Four independent studies have indicated that the drug may be effective in preventing cytokine storms. In the largest out of the four studies, carried out by the Hospital of Prato in Italy, deaths were significantly lower among the patients treated with baricitinib as opposed to the control group, and baricitinib patients were vastly more likely to be discharged from the hospital within two weeks.
Countless other European startups in the healthtech sector have rolled out special initiatives to help combat the pandemic— lending a helping hand and, at the same time, showcasing their ground-breaking products. These companies are offering high-tech interventions that are enabling people – including health professionals – to work more effectively from home, as well as delivering tools and platforms that are providing parents and students with opportunities for remote learning.
Appointment booking platform Doctolib—one of France’s five startup unicorns— has made its teleconsultation platform freely available to all doctors in France, while others, like Estonian digital startup Velmio, Zurich-based Scandit and Babylon Health, the British digital health unicorn, have pledged resources to tracking, testing and collating data on Covid-19.
Fighting for a brighter future
Keeping the European startup ecosystem alive and functioning as the world adapts to post-pandemic conditions has been a big priority for the European Commission. The €10bn pot promised by the European Innovation Council to amass ‘the biggest deeptech equity fund in Europe’, added to a generous €13bn budget for research grant, has the potential to change the game for tech startups.
As tensions between the US and China create fresh opportunities for the bloc to attract inward investment – especially as the practice of remote and distributed working gains ground – Europe could find itself ideally placed to challenge the status quo. Europe’s acknowledged primacy in areas such as energy and aerospace could also give credence to the bloc’s bid for global tech leadership. As Europe recovers from the economic downturn it may well be European startups’ turn to shine.
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