Corona Virus Outbreak – Impact On The Startup Ecosystem In Asia

The deadly Corona Virus is spreading across the world like a wildfire. The impact of this novel virus is not only affecting human lives but the economy in general. The brunt can be seen in the startup ecosystem in Asia, as well. According to a report by CB Insights, financing for private companies in Asia is likely to slow down amid this global epidemic. However, it may bounce back later. This report also highlights how the epidemics-SARS in 2003 and Zika in 2016 impacted markets in their respective regions.

The Outbreak And Its Impact

Despite a big economy, China is grappling with problems such as; economic slowdown, the US-China trade war, and a campaign to dissuade local governments and companies from their dependence on borrowing. All this may add up to the impact.

According to the investment database CVSource, the Chinese startups in 2019 raised 44% less funding than the previous year. The total funding amount in 2019 was US$54 billion. With the outbreak of this mushrooming disease, financial markets across Asia are witnessing a downward trend. Besides that, there is a sharp drop in stocks in China since investors are pondering on the potential impact of coronavirus.

The funding for private companies in Asia in the years 2003 and 2004 was declined by 27% and 29%, respectively, according to a report by CB Insights. However, by the third quarter of 2004, the funding started to gain momentum, and by May that year, WHO announced China free of new cases. In the year 2005, Yahoo’s US$ 1 billion investment in Alibaba, the biggest e-commerce company in China, helped the funding for Asian startups hit a record.

Similarly, when WHO declared the Zika virus a global emergency in 2016, the local funding in the first quarter had dropped significantly. This virus mainly affected South America, and the entire year saw the funding volume decreased by 50%. In 2017, when WHO ended the warning, the funding started to gain momentum again. By the second quarter of 2017, South America saw a new high in the number of deals, and the total investment amount was US$ 2.9 billion.

Will Coronavirus Cause The Same Kind Of Damage As SARS Caused It?

The extent of the severity of this disease has become more apparent now since the time it was first reported in December 2019. There has been a surge in the number of cases, the virus has affected over 20000 people and has claimed more than 350 lives across the world — the WHO has declared it as a global emergency. According to health experts, the death toll may rise due to a large number of infections. A blunder in China could shamble jobs and growth everywhere in Asia.
However, the authorities seem to be responding quickly to the coronavirus outbreak then what they did in 2003. It all depends upon how well China can contain this outbreak. The Asian market is hopeful that by the end of this novel coronavirus outbreak, there could be landmark deals and new funding highs.