For start-ups, times of crisis can be a challenge but also a crucible

Times of crisis are challenging for start-ups. According to the World Economic Forum, “More than 70% of start-ups have had to terminate full-time employee contracts since the start of the COVID-19 pandemic.” Crunchbase News says, “COVID-19 slashed the number of VC [venture capital] rounds in the U.S. by 44 percent.” VoxEU is blunt about the outlook for start-ups: the COVID-19 crisis is “reducing their creation, challenging their survival, and limiting their growth.”

Clearly, start-ups are vulnerable to the economic uncertainty brought about by the COVID-19 pandemic. Funding is always at risk—these firms tend to engage in high-risk activities compared with other small and midsize organizations—and doubly so now. Whatever their investors’ tolerance for risk is, start-ups can’t be blamed for hitting pause when we are on the verge of a global financial crisis.

A decrease in available venture capital and other traditional funding sources affects new start-ups significantly: investors tend to favor known entities instead of seeking new ventures with inexperienced entrepreneurs, meaning that fewer new businesses are created in times of financial duress. This situation is exacerbated during the pandemic, when in-person networking opportunities are impossible.

Start-ups are also exposed to changes in the job market, as they often rely on a small, highly specialized founding team. In addition, they are at the early stages of forming relationships with consumers and suppliers, making them vulnerable to market forces.

But times of crisis are periods of disruption and change, and start-ups can have an advantage, as they can quickly identify market gaps and respond to changing customer needs. In fact, many successful businesses originated during and immediately after recessions—Uber, Airbnb, and more.

The pandemic has revealed opportunities in online education, remote work, automation, and of course, COVID-19 diagnosis, treatment, and prevention.

Only last week we saw an example of a successful start-up in the field of COVID-19 prevention. BioNTech is the German company that has been working with Pfizer to create a new vaccine; the companies reported that it was 90% effective in a Phase 3 cohort of more than 43,000 people in a press release last week (see page 12; these results have not yet been peer reviewed).

The company, founded in 2008 to work on cancer treatments, has never brought a drug to market. It started developing a vaccine only in January after its CEO, Ugur Sahin, read an article in the Lancet about the rapid spread of the new virus in parts of China and decided to take action.

BioNTech’s story is an excellent example of entrepreneurship and the power of start-ups. C&EN’s 10 Start-Ups to Watch is a celebration of that power, and I’m pleased that we can dedicate the better part of this issue (pages 26–47) to highlight 10 young firms that are working to tackle drug discovery, quantum computing, recycling, sustainable materials, and more.

Learn about Zapata Computing, a quantum computing software firm that is already making its mark in a field that is in its infancy, and Aryballe, a French company that has developed an electronic nose that “combines biochemical sensors, advanced optics, and machine learning to collect and identify thousands of odors,” according to C&EN reporter Alex Scott. Dig into Ventus Therapeutics’ structure-based approach to drug discovery for inflammasomes and innate immune systems proteins, an approach that CEO Marcelo Bigal describes as doing “drug discovery with the lights on.” Also, check out our take on five chemistry-based companies from around the world that could soon be grabbing headlines (page 48).

We’re now in our sixth year of featuring up-and-coming chemistry-based start-ups. Companies we’ve highlighted in past years have gone on to do great things, and we’re confident this year’s group will also be successful.

Views expressed on this page are those of the author and not necessarily those of ACS.