COVID-19 has without a doubt become a global pandemic; forcing many businesses to shut their doors and employees to continue their work from the safety of their homes. Startup funding all throughout Asia is expected to take an immense hit, especially since many nations appear to be having a hard time keeping the spread of the coronavirus in check. This is evidenced by the already slowing global economic growth rate and dips in private funding during previous medical-related outbreaks.
In 2019, Asia was the most active venture capital market globally, after the United States, with 5,295 deals and US$63 billion in funding. The COVID-19 outbreak has brought into question uncertainties within the investment flows into Asia, and many startups have already started wondering if they will be able to weather the storm.
Let us take a look back at two previous major outbreaks in recent history to see how they affected private funding.
SARS is a type of coronavirus that gained notoriety for rapidly spreading in 2003. It affected up to 26 countries and more than 8,000 people. It originated in 2002 in China’s Guangdong province, and, much like the current Wuhan coronavirus, was thought to be an animal virus, according to the World Health Organisation (WHO). By 2004, the outbreak was contained.
Asia’s private market funding in 2003 fell approximately 27 percent compared to 2002, while in 2004 it fell 29 percent; according to CB Insights.
Following the WHO’s declaration that the outbreak was ‘contained’ in 2004, deal volume and funding recovered, and after a year, funding hit record high.
According to the WHO the earliest recorded outbreak of Zika virus disease was in 2007, in Micronesia, followed by another one in 2013 across Pacific countries. The latest outbreak happened in 2015 in Brazil, and spread quickly to the rest of South America, US, and other parts of the world.
During the 2015-2016 outbreak, Zika was declared a global emergency in February 2016 and said state of emergency was only called off in November 2016.
The outbreak of the disease mostly transmitted by the Aedes mosquito caused a 50 per cent drop in funding activity in South America in 2016 versus 2015, according to CB Insights.
In Q1 of 2016, when the WHO declared Zika a global emergency, private market funding was just 25 percent of its level in Q1 2015.
The year following the emergency, private funding in South America reached a record high of US$2.9 billion.