3 ways to stop COVID-19 from drying up start-up talent pools

youth_

(Yingchou Han, Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Marc Penzel, Founder and President, Startup Genome & JF Gauthier, Founder and CEO, Startup Genome


  • Policy leaders have the power to prevent the destruction of start-up pools, from relaxing visa rules to encouraging transfer between academia and industry.
  • Ecosystem leaders who have spent years building a pipeline of domestic talent and working hard to attract the brightest minds need to act now.
  • Retaining foreign talent requires immediate attention, as companies are not the only ones about to lose out: entire nations also run the risk.

In a matter of weeks, the challenge facing most innovative start-ups has shifted dramatically. Not long ago they were neck to neck, competing to acquire high-calibre talent to join their ranks. Now, the economic crisis caused by COVID-19 is threatening start-up numbers, and by extension, any demand for talent.

All-star teams on a path to creating global leaders in their companies are disintegrating before our eyes.

Startup Genome’s research shows that 74% of start-ups have had to let go of full-time employees, with more than a quarter of these companies forced to dismiss 60% or more of them. And just think; we are only at the very beginning of the economic crisis.

Image: Startup Genome

Looking into past periods of economic uncertainty reveals that without proper measures to retain entrepreneurial talent, the best candidates will migrate to large, incumbent firms, further their studies, or move abroad.

International talent drives intercultural awareness, globalises business models and opens up new markets.

—Marc Penzel

While each path is a rational response, the net result would be a decrease in the human capital available to innovative start-ups and the ecosystems that support them.

Ecosystem leaders who have spent years building a pipeline of domestic talent and working hard to attract the brightest minds need to act now. Immediate policy responses can help keep high-calibre talent close and sustain the momentum of start-up ecosystems.

Here are three areas to start navigating:

1. Wage support schemes and survival programmes

Employee salaries are the largest variable expense and an immense burden for start-ups, especially at an early stage of development. In the absence of funding prospects, CEOs will be forced to enact short-term and broad-sweeping furloughs and layoffs.

A proven policy response to keep skilled workers in their jobs is the German concept of ‘Kurzarbeit’, by which employers can furlough employees without cutting them loose entirely. The government covers up to 67% of an employee’s lost income for a period of up to a year. This model received a lot of credit for Germany’s rapid recovery from the 2008-9 crisis, and has since been emulated by several other countries.

Still, a recent study suggested that the German model is currently the least favourable compared to other European ones. To combat the crisis at hand in the best way possible, and the study points to Austria where the government covers as much as 90% of lost wages for the lowest income group.

Even with wage support schemes and other survival programmes, the harsh reality is that layoffs have become inevitable in the current crisis. Governments and start-up ecosystem leaders will urgently need to find new ways to retain top talent in their region.

2. Relaxing visa rules for immigrant talent

Retaining foreign talent requires immediate attention, as companies are not the only ones about to lose out: entire nations also run the risk. There is an abundance of evidence that foreign entrepreneurs and talent drive start-up growth and success in a disproportionate manner.

The Startup Genome team found that start-ups selling to global markets grow twice as fast as those focused on domestic markets. International talent drives intercultural awareness, globalises business models and opens up new markets.

There is an abundance of evidence that foreign entrepreneurs and talent drive start-up growth and success in a disproportionate manner.

—Marc Penzel

Research from Startup Genome’s 2018 Global Startup Ecosystem Report also found that as many as 20% of the world’s tech founders are immigrants, even though immigrants only make up about 4% of the world’s population. Similarly, 28% of start-up engineers worldwide are foreign-born.

Some very practical steps can be taken to avoid a brain drain of this talent, starting with an immediate review of visa schemes.

While virtually all leading economies have introduced visa routes for start-up founders and employees, a significant proportion of these schemes remains tied to work contracts. This results in the automatic expulsion of people who are laid off.

Policy makers must consider at least a moratorium to respective visa schemes if they want to avoid losing the talent they’ve invested so much in attracting, educating and integrating into their tech communities.

One region making a notable effort in this regard is the UAE, where residency visas and IDs that expired on 1 March 2020 were renewed for a period of three months without additional fees.

To date, no country has made stronger commitments to retain or attract foreign talent in the aftermath of the crisis.

3. Encouraging transfer between academia and industry

One way to accelerate the organic growth of any region’s given talent base is to strengthen the collaboration between its tech ecosystem and its local universities, for example by subsidising the hiring of new graduates by start-ups and SMEs.

Dr Dan Herman, former Head of Strategy at Canada’s Ministry of Innovation, Science and Industry, suggests policy leaders look at the example of Mitacs. This Canadian not-for-profit organisation brokers the placement of scientific and technical researchers and graduates into start-ups and SMEs at a reduced cost to the firm.

Mitacs is widely viewed as an important component of Canada’s innovation system, with participating firms indicating that the programme increases their innovation-related activities.

In this time of economic uncertainty, when start-ups and SMEs are prone to layoffs and cost cutting, such support should be enhanced to ensure that both new graduates and innovative firms continue their momentum in terms of accumulating experience and innovation processes, respectively.

COVID-19 risks resetting the scorecard on start-up ecosystems

My colleagues at Startup Genome projected that $28 billion in global start-up investment may go missing this year. Minor tweaks to existing policy measures will not suffice to retain the talent.

Instead, inaction will cause many to pursue new opportunities. Beyond offers from incumbent firms and institutions of higher education, scale-ups and start-ups from other start-up ecosystems will try to attract furloughed talent within weeks.

While this represents a huge risk for some, for those who proactively enact smart policies it could represent a major opportunity.

Decisive action will allow your economy to attract new talent, recover rapidly and even gain a competitive advantage by being among the first out of the gate.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Africa: Urgent action needed to mobilise domestic resources as tax revenues plateau

‘Dangerous nationalism’ seriously threatens efforts to tackle statelessness: UNHCR chief

Fair minimum wages: Commission launches second-stage consultation of social partners

2014 will bring more European Union for the big guys and less for the weak

Don’t underestimate the power of the fintech revolution

EP President at the European Youth Event: “Your ideas are key in shaping EU’s future”

A day in the life of a refugee: why should we care?

Is there a way out of the next financial crisis? Can more printed money or austerity save us all?

Palliative care and Universal Health Care

Greece bailout programme: Full agreement after marathon negotiations on debt relief between IMF and Eurozone

UN Committee says Ebola in DR Congo still an international public health emergency

Why the Fourth Industrial Revolution needs more arts graduates

The UK referendum has already damaged Europe: even a ‘remain’ result is not without cost to Britain and the EU

GSMA & UNDP announce an ‘Impact Partnership’ Advancing the Sustainable Development Goals at MWC Barcelona 2021

5 inventions that could transform the health of our ocean

Inaction over climate emergency ‘not an option’ says UN Assembly chief

Distributed ownership: what it means and how it could transform India

Contact the Sting

‘Everyone must be on board’ for peace in Central African Republic: UN’s Lacroix

Hungary’s emergency measures: MEPs ask EU to impose sanctions and stop payments

Antimicrobial resistance: how can an intersectoral approach between society and healthcare professionals be developed and applied?

A Sting Exclusive: “One year on from the VW scandal and EU consumers are still in the dark”, BEUC’s Head highlights from Brussels

UN rights chief welcomes new text to protect rights of peasants and other rural workers

Will we join hands for a tomorrow without antimicrobial resistance?

Coronavirus: Commission proposes €6.8 million in total to support 1,700 dismissed workers of air carriers KLM and Finnair

G20 LIVE: G20 leaders reaffirm OECD’s role in ensuring strong, sustainable and inclusive growth

US cities are going to keep getting hotter

Thursday’s Daily Brief: ambulance attack in Libya, #GlobalGoals defenders, human rights in Cambodia, Swine Fever

Where are the world’s nuclear weapons?

Trump’s blasting win causes uncertainty and turbulence to the global financial markets

‘Comprehensively include migrants’ or sustainable development won’t happen, warns General Assembly President

Rise in number of children killed, maimed and recruited in conflict: UN report

Improving coverage of mental health services

‘€1 million’ fines for rescue boats prompts UN concern for future sea operations

All for equality – 2020 is a pivotal year for Gender Equality

Monday’s Daily Brief: drug-resistant diseases, Venezuelan refugees, fighting in Tripoli, and hate speech

UN Forum examines three pillars of 2030 Global Goals

FROM THE FIELD: A UN peacekeepers-eye view of DR Congo

Digital education is both a necessity and an advantage for the Global South. Here’s why

“No labels for entrepreneurs!”, a young business leader from Italy cries out

‘More support’ vital to put Afghanistan back on a ‘positive trajectory’ – top UN officials

Germany hides its own banks’ problems

WEF Davos 2016 LIVE: “It is the implementation, Stupid!”, German Finance Minister Wolfgang Schaueble points the finger to Greece from Davos

COVID-19: latest on evaluation and authorisation of vaccines

Coronavirus has ‘pandemic potential’ – but what is a pandemic?

What Thailand can teach us about mental health

Final vote on European Solidarity Corps

Climate change update: consistent global actions urgently needed as we are running out of time

Financial services: Commission sets out its equivalence policy with non-EU countries

Why will Paris upcoming “loose” climate change agreement work better than the previous ones?

An U.S.-EU Agenda for Beating the Global Pandemic: Vaccinating the World, Saving Lives Now, and Building Back Better Health Security

Antitrust: Commission publishes report on implementation of Damages Directive

Q&A on extraordinary remote participation procedure

Next six months crucial for the EU, says von der Leyen at the start of the German Presidency of the Council of the EU

Further reforms in Japan needed to meet the challenges of population ageing and high public debt

Delivering masks across borders: EU Single Market protecting citizens’ health

Training for staff in early childhood education and care must promote practices that foster children’s learning, development and well-being

Changing the EU copyright law won’t bring us much closer to Digital Single Market

Mergers: Commission waives the commitments made by Takeda to obtain clearance of its acquisition of Shire

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: