FOREWORD

The economic crisis driven by the COVID-19 pandemic had an unprecedented effect on startup companies around the world. Many startups have to take drastic decisions to survive. Startups are forced to revise business processes and models, and decrease costs. As it always happens during a crisis some businesses stop operations, others pivot and, the rest, in contrast, find themselves more competitive.

Imaguru Startup Hub put together a survey to find out the crisis impact on Belarus Startups. The survey was organized in May 2020 within the USAID 'AID-Venture' project. The survey gathered 144 responses from Belarus founders.

We believe this report will help better understand the impact of the COVID-19 crisis on startups in Belarus and equip the government with tools and actionable insights to support the local startup ecosystem.

We urge Belarus Government and business community to join efforts in minimizing the pandemic effect on the startup community and come up with effective steps helping Startup companies survive. According to founders and startup executives, the top five most helpful policy responses for their businesses would be, in order:

#1 Grants to preserve company liquidity; #2 Tax relief measures; #3 Support to protect employees, like payroll supplementation grants; #4 Loans to preserve company liquidity; and#5 Rent pause in payments

We also believe the survey finding will help many companies to make right leadership decisions sooner rather than later. While it is important to be prepared for the worth, we think every crisis creates opportunities. According to Startup Genome, over half of Fortune 500 companies started during a contraction, and over 50 unicorns were created in the Great Recession alone. The COVID-19 crisis is no exception.

We support Belarus startup founders in their determination, optimism and so needed balanced approach toward the economic uncertainty due the COVID-19 outbreak.

Imaguru Startup Hub Team

USAIDUSAID is the United States Agency for International Development. USAID programs facilitate cooperation among public organizations, local authorities and the economy’s private sector, thus promoting citizens’ engagement in various domains of activity, which helps develop viable plans of tackling local problems. USAID also promotes Belarusian economy’s private sector growth, providing business training opportunities, information support, as well as assisting in legislation reforms and supporting entrepreneurship development organizations. Since October 2016, USAID has been funding an ‘AID-Venture’ initiative for venture funding development in Belarus, which is intended for five years.

BELBIZ GROUPOF COMPANIESThe Belbiz Group of Companies is Belarus’ top hub for entrepreneurial and startup initiatives.The Belbiz Group of Companies features the bel.biz business portal and Imaguru startup hub. The ‘Imaguru’ startup hub is a major co-working area, a learning center for startups, investors and corporations, as well as a platform for startup-related events. Belbiz hosts the Global Entrepreneurship Week in Belarus as well as Venture Day Minsk, the largest international startup conference in Belarus.

IMAGURUImaguru Startup Hub is a place for globally-minded technology ventures, investors and mentors. Located in the very center of Minsk, Imaguru is built around two core areas: entrepreneurship and innovation. The guiding principle of Imaguru is knowledge sharing where innovation, commitment to “change the world” idea and self-belief are valued. We host tech talents and best startup teams from Belarus which co-work at Imaguru, the heart of Belarus technology entrepreneurship ecosystem. Imaguru brings together startup companies, investors and industry experts and corporations. Imaguru hosts TechMinsk Accelerator which provides selected startups with investments and quality acceleration program.

This survey was made possible owing to the support of the American people rendered via the United States Agency for International Development (USAID). The views expressed herein are the sole responsibility of Belbiz Group of Companies and under no circumstances can be construed as reflecting the standpoint of USAID or the U.S. Government.

TABLE OF CONTENTS

KEY FINDINGS

RESPONDENTS PROFILE AND METHODOLOGY

CHAPTER 1. CRISIS IMPACT ON BELARUS STARTUPS

CHAPTER 2. ANTICRISIS MEASURES

CHAPTER 3. STARTUP FUNDING

CHAPTER 4. EXTERNAL SUPPORT

CHAPTER 5. BELARUS STARTUPS POST-CRISIS

PERSPECTIVES

567 9111315

KEY FINDINGSALMOST THREE OUT OF EVERY FOUR STARTUPS ARE SEVERELY AFFECTED BY THE COVID-19 CRISIS.

CAPITAL

• The adjusted runaway forecast proves that the vast majority (69.4%) of the startupsare threatened in what we call “red zone”: they have three to six months of cashrunway left.

• 77.5% of the startups that were in fundraising mode have reported a negative trendbecause of the virus outbreak.

• 72% of Belarus startups have experienced problems in attracting current or plannedfunding rounds.

• The funding issues is considered the key problem for 72% of the startups in thesecond half of 2020.

TALENT AND JOBSSince the beginning of the crisis 53% of Belarus startups have taken specific measures in regard to their employees. Among them are:

• Salaries reduction 76.6%• Termination of full-time employees 66.6%• Non paid vacations to their staff 50%• Staff lays off 50%

OPERATIONS

• A staggering 86% reported that their sales have decreased.• 70% of the startups companies had to stop their business expansion projects.• Almost 80% of the startups have taken specific measures to address various

problems as part of the COVID-19 pandemic.

• A minority of startups (26%) have not signalled negative COVID-19 effects on their businesses.

FUTURE• At the same time 55% of the startups believe that the crisis effect will go beyond 2020.

• 8% of all startups foresee they will stop operations by the end of 2020.

• 28% of the startups will not be able to survive the summer 2020 unless they attractadditional funding in the coming months.

RESPONDENTS PROFILE AND METHODOLOGY144 Belarus startups took part in the survey which was organized online in May 2020.

77.7% of them are startups with growing sales. Companies come from every startup sub-sector (e.g., AI, Digital Health, Edtech, SaaS, etc.), tackle various markets (e.g., B2B, B2C), and are at different funding and lifecycle stages.

Almost half of all startups (47.2%) are B2B companies, one third (29.2%) use both B2B and B2C models. 32% of the startups are HTP residents. The majority (69.5%) of all startups are small companies having less than 15 employees. 80% of the startups had initial funding plans for 2020.

In this analysis, we only include technology-driven startups. We define Belarus startups by the location where most of the company’s employees are based at.

While the survey instrument is focused on addressing questions about the COVID-19 crisis effects on startups, it builds upon our experience surveying Startup founders and the venture capital ecosystem players in Belarus across several years. The data collected so far was based on Imaguru’s panel of tech startups.

POLICYThe most important support that startups need from the government is financial assistance measures including

• Government grants to preserve thecompany’s liquidity 51.4%,

• Taxes reliefs 48.6%, and• Micro Credits 32.4%.

CHAPTER 1. CRISIS IMPACT ON BELARUS STARTUPSBelarus startups have faced an unprecedented and unseen situation in their businesses during the COVID-19 pandemic. According to the survey, the pandemic had a negative effect on almost 70% of the startups. This figure shows the magnitude of the crisis within the startup ecosystem in Belarus.

A minority of startups (26%) have not signalled negative COVID-19 effects on their businesses. These companies operate in Gaming, Edutech, Fintech and other industries experiencing growth in the face of the COVID-19. On the positive side, 42.1% of such startups report their products have become more competitive.

The most significant impact the crisis has affected startups is sales. A staggering 86% reported that their sales have decreased. The number is higher than the average on the global market. According to Startup Genome report1, 74% of global startups report decrease in sales.

72% of Belarus startups have experienced problems in attracting current or planned funding rounds. 70% of the startup companies had to stop their business expansion projects.

1 The Impact of COVID-19 on Global Startup Ecosystems: Global Startup Survey. Startup Genome

https://startupgenome.com/reports/impact-covid19-global-startup-ecosystems-startup-survey.

Further in the document all the global rates references are taken from the same report.

Diagram 1. Share of startups, who faced negative effects of the pandemic.

Faced Negative Effect

Didn’t Face Any Negative Effect

N/A

26.4%

69.4%

Chart 1. Problems Belarus startups face due to COVID-19.

86,0%

70,0%

72,0%

48,0%

48,0%

34,0%

6,0%

26,0%

Sales have been decreased

Problems in attracting current or planned funding rounds

Cancelation of business expansion projects

Impossibility of paying full salaries to employees

Losses associated with currency fluctuations

Delays in receiving payment for delivered products or rendered services

Difficulties with the supply of raw materials

Other

THE IMPACT OF COVID 19 ON BELARUS STARTUPS | MAY 2020

ROCKETDATA

Our revenue growth slowed down. Some of our customers are currently not operating at all and therefore cannot pay bills. We’ve decided to support such customers and not to disconnect them from the service during the pandemic. The COVID-19 crisis affected mostly our cash flow metrics. Previously, 90% of our customers used to prepay for annual subscriptions, but now almost all customers pay monthly or quarterly, which has a significant impact on our financial capabilities.

We postponed our next investment round, because (1) we were not able to show a growing revenue stream from EU clients which is a new market for us, and (2) VC funds postponed their investment decisions. In this situation, we were forced to stop hiring, reduce all our marketing expenses, decrease employee salaries and slightly reduce staff. Now we are negotiating a bridge round with our current investors, this is the only way we can finance our company at the moment. Unfortunately, even these negotiations are not as fast and smooth as we would wish.

DARYA DANILOVA, CEO and Cofounder at RocketData

RocketData.io is a SaaS service which helps keep correct your online-presence and reputation of your locations, get more customers from online services and maps, and makes your data actual in popular online services. (https://rocketdata.io)

CHAPTER 2. ANTICRISIS MEASURESAlmost 80% of the startups have taken specific measures to address various problems as part of the COVID-19 pandemic.

Out of the startups who reacted to the pandemic 70% have started remote work, 53% - reduced personnel costs, 48% - pivoted or shifted business models, and 48% - stopped new products development.

When asked about their employees, the respondents, who have taken specific measures (53%), stated that they had to

• ●Cut salaries 76.6%• ●Terminate full-time employees 66.6%• ●Offer non paid vacations to their staff

50%, and• ●Lay off personnel 50%

Belarus startups didn’t take such drastic decisions in regard to its employees as global startups. 74% of global startups had to lay off personnel.

Although as stated above there are companies that have not faced negative impact on their operations (26%), they have taken specific measures to address potential crisis effects:

• ● Remote work 81.8%• ● New online sales instruments 36.4%• ● Business models revision 27.3%, and• ● Staff costs reduction 18%

Even though none of such startups indicated that they laid off staff.

Chart 2. Measure taken in regard to startups employees.

Diagram 2. Share of startups, who have taken anticrisis measures.

Salaries reduction 76.6%

66.6%

50.0%

50.0%

6.67%

Termination of full-time employees

Non paid vacations to their staff

Staff lays off

Other

Startups, who have taken anticrisis

measures

Startups, who haven’t taken anticrisis measures

N/A

77.8% 16.7%

THE IMPACT OF COVID 19 ON BELARUS STARTUPS | MAY 2020

BLINGER

At the end of February - the beginning of March it became clear to us that a global and, the most important, unpredictable crisis was coming. Blinger made optimization of the company’s staff and internal processes. It’s been 3 months since that time, and I do not regret the decision at all. However, the decision was difficult. Financial indicators, and net profit are growing, and we launched a new project for B2B-sales, which is called Hugery.com”

EVGENY BESSCHASTNOV, CEO and Cofounder at Blinger

Blinger.io is an omni-channel software platform which allows clients to connect to their customers through popular messengers, e-mail and live chat with a single API, interface or integration with helpdesks.

12%36%

28%

12%

10%

CHAPTER 3. STARTUP FUNDINGGiven that a record number of startups have faced revenues decrease, external funding including bridge rounds could help many of them. Only 12% of startups have runway of 12 months and more. One year funding period is considered an optimal time to survive the pandemic and start proving good results in the post pandemic world. Many experts believe the crisis effects will last at least one year and then startups have to show growth at least within one quarter to be able to attract venture capital.

At the same time, most startups have a 3-6 months runway (64%). This questions the existence of many startups in 2021, one third of companies (28%) will not be able to survive the summer 2020 unless they attract additional funding in the coming months.

The numbers look similar to the global market updates - 41% of global startups report a 3 month runway.

The startups have also revised their funding plans for 2020. 80% of all startups had initial plans to attract venture capital in 2020. 77.5% of the startups that were in fundraising mode have reported a negative trend because of the virus outbreak. This ranged from decreased valuations (32.5%) and smaller rounds (25%) to the need to

postpone the raise despite the fact they need money right now (20%). The funding issues is considered the key problem for 72% of the startups in the second half of 2020. Among other cumbersome situations projected for July-December 2020 are

• ● Sales decrease• ● Payments delays• ● Exchange rate turbulence, and• ● New project canceling

Diagram 3. Startups runways.

9-12 months

More than 1 year

6-9 months

N/A

3-6 months

Up to 3 months

THE IMPACT OF COVID 19 ON BELARUS STARTUPS | MAY 2020

ARTYLINE

At Artyline we initially planned to release a new full-fledged version of our product this spring, 2020. We planned to attract a round of investment following a release. However, the pandemic has changed our plans for release dates. Now we hope that by the end of summer the information field and the pandemic situation will be better and we will be ready to release our product at the right time. Accordingly, we plan to raise our next round of investment in the Fall of 2020.

HELENE MALYUTINA, CEO and Cofounder at Artyline

Artyline is an AR Mobile app for creating interactive high-fidelity prototypes based on sketches using computer vision. You may visualize and validate ideas in one click with this application. (https://artyline.co)

CHAPTER 4. EXTERNAL SUPPORTDespite the crisis effect only 51% of companies reported they need external support. This may prove the thesis that entrepreneurs used to rely only on their own resources while running business. This is especially true in Belarus. Only 38% of global startups reported they have not received assistance and do not expect to be helped by policy relief measures related to the crisis. In Belarus the number of self reliant entrepreneurs is higher probably because of the lack of government aid practice focused on startup companies.

The support that can be provided by the business community including investors, banks, business partners and clients is also needed by startups, includingBridge rounds 59.5%

• ● Anticrisis measures consulting 40.5%• ● Trial and free-of-charge services

40.5%• ● Mentorship 29.7%• ● Rent payments pause 27%

As we see from the survey results many startups expect the support not just from the government but from the fellow entrepreneurs, partners, investors

and banking institutions. Such support could focus on consultations on building new processes, re-organising marketing and sales, building new success stories and customer support programs, and redesigning sales strategies. We believe dispute physical distancing, the startup ecosystem members will not distance from each other socially. When asked about the information the startups need today, there highlighted the following:

• ● Information on Government measures47.2%

• ● Economic forecasts 41.7%• ● Lessons learned from other companies

38.9%, and• ● Effective remote work tools 31.9%

The community can hardly influence the first of the above but all the rest can be done together by the efforts of the community to support each other.

The most important support that startups need from the government is financial assistance measures including

• Government grants to preserve thecompany’s liquidity 51.4%,

• Taxes reliefs 48.6%, and• Micro credits 32.4%.

THE IMPACT OF COVID 19 ON BELARUS STARTUPS | MAY 2020

80DAYS.ME

Our startup company operates in the travel industry which was mostly affected by COVID-19. We have already taken measures to decrease our expenses on staff and marketing, on product development, and have focused on customer care. Within the last few months we have returned charges to almost all our customers who have cancelled their trips, because we are running a full responsibility on the quality of service we deliver. We expect the same level of responsibility from other organizations in the service supply chain, example banks, acquiring services, air companies and others. Today similar startup companies from the travel industry need support, including financial support, from the government, travel associations and other organizations involved in the industry.

ALEH TSIKHANAU, CEO and Cofounder at eightydays.me

Eigthydays.me is an application which builds an extended trip based on a basic set of criteria, example a departure city and a date range and then for destination your options include a handful of others. It helps you to design a multi-city tour with a total price for all flights and trains. (https://eightydays.me)

CHAPTER 5. BELARUS STARTUPS POST-CRISIS PERSPECTIVESTo minimize the effect of these kinds of economic crises, Belarusian startups need a strong belief in the future, a positive attitude, and perseverance. All the traits which are typical of real entrepreneurs. Our survey proves the thesis. Despite the companies and entrepreneurs are struggling, 41.7% of the startups foresee improvements in their business operations in the nearest future. More than half (56.7%) out of them believe their products have become more competitive.

8% of all startups foresee they will stop operations by the end of 2020. This number is higher than the global average. 96% of the global startups continue working during lockdowns.

The adjusted runaway forecast proves that the vast majority of the startups are threatened in what we call “red zone”: they have three to six months of cash runway left. In short, that means they could run out of money by the end of the summer season 2020.

Overall unlike many traditional businesses technology based companies are more resistant to the pandemic disruptions. Based on the survey results we are happy to see that the community spirit is still high and thriving. At the same time 55% of the startups believe that the crisis effect will go beyond 2020.

Given that, it is vital today for the government and the ecosystem to support Belarus

startups through the crisis by building effective, measurable and prompt tools and measures. According to founders and startup executives, the top five most helpful policy responses for their businesses would be, in order:

#1 Grants to preserve company liquidity; #2 Tax relief measures; #3 Support to protect employees, like payroll supplementation grants; #4 Loans to preserve company liquidity; and#5 Rent payments pause.

THE IMPACT OF COVID 19 ON BELARUS STARTUPS | MAY 2020

ONDE

What affected Onde the most is that ride-hailing services in many countries have been banned or limited. So our customers went looking how to diversify and requested alternative solutions from us. The most requested was food delivery, so we dived deeper in the vertical and now working on a solution. What surprised us is that remote work didn’t affect the company at all and some even noticed an increased productivity, probably hence time saved on commute and more focused time slots. Though the company and processes have been built for remote work from the first day.

EUGENE SUSLO, CEO and Cofounder at ONDE

ONDE App is ride-hailing tech for pioneers with the technically supreme fleet management and payments platform. They create leading-edge apps trusted by 200+ on-demand services in 60+ countries. They suggest booking apps branded for companies, dispatching software, fleet management system. It includes white label solution for any on-demand service, whether it is a taxi, ride-hailing, healthcare services, booking or even pet care. (https://onde.app/)