COVID-19 impact on tech startups in 2021

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Unlike most other industries, the tech business has passed relatively well throughout the COVID-19 storm. Whereas stay-at-home restrictions and company closures have wreaked havoc on industries that depend on physical services and in-person consumers (such as hospitality, arts, and tourism), tech companies appear to be surviving this crisis relatively unharmed.

Nevertheless, with the coronavirus boosting our daily screen time by a third and accelerating the adoption of digital technology by several years, the incidents of the pandemic have caused several aspects of the software industry to function better than they did before. Now is a good moment to reflect on how these past years' exceptional circumstances have contributed to the recent spike in software development. Now is a good time for tech startups to begin their journey.

In the following article, we will be covering several subjects like digitalization during COVID-19, how startups around the globe are dealing with the ambiguity of the new normal, and a little about the future of the tech industry.

Digitalization and COVID-19

The epidemic made it simpler for startups who had been contemplating whether or not to embrace digital transformation. Nobody expected COVID-19, and no one predicted the changes it would bring to corporations in all industries, therefore the ones that can survive without much struggle are the ones that can apply the digital transformation.

The term digital transformation refers to the integration of digital technology into all areas of a business, which alters the way organizations function and provide utility to their consumers. Technology, data, process, and organizational change are the four key domains of digital transformation, with each domain dependent on the others so that firms can establish themselves in the digital economy.

How are startups dealing with the new normal across the globe?

As previously said, the impacts of COVID-19 may be felt all over the world and have a substantial impact on startups in the technology industry. From raw material supply shortages to disruptions in the electronics value chain. Positively, the disruption has encouraged remote working and a quick focus on assessing and de-risking the end-to-end value chain.

On the other hand, now is the time for Tech Startups Industries, since there are 5 branches that are growing during COVID-19: Artificial Intelligence (AI), Healthtech/biotech, Space tech, Edtech, Fintech. Their potential long-term effect on technology sub-sectors such as software development reached these 5 stages:

On the other hand, now is the time for Tech Startups Industries, since there are 5 branches that are growing during COVID-19: Artificial Intelligence (AI), Healthtech/biotech, Space tech, Edtech, Fintech. Their potential long-term effect on technology sub-sectors such as software development reached these 5 stages:

1. Increased productivity as a result of remote working

While the transition to working from home disrupted communication and limited collaborative work for many organizations, it did appear to have a silver lining — it  improved productivity. Many people believe that the COVID-19 standards shifted their attention to software development and IT operations. Others will claim that it has accelerated their cloud migration activities.

Why is this likely to have occurred in the IT and software industries? Because software development is generally a solitary activity, remote working appears to function well by preventing coders from wasting too much time in group meetings. When it comes to staying in touch with the team, the variety of video conferences and social platforms such as Slack, Skype, and Telegram, makes it possible. Furthermore, because of the flexible structure of remote work, software engineers may adapt their schedule to their preferences, allowing them to produce more output in an eight-hour day than they could in a lengthier in-house office stay.

Even so, the information on higher efficiency during COVID-19 seems to come with certain cautions. While larger trends indicate that productivity was increasing, others suggest that certain employees struggled to avoid distractions and that their performance dropped as a result of the lockout. As a result, with remote working clearly not benefiting all software workers, a hybrid working style may give diversity and additional support to IT workers as we enter a “new normal”.

2. Increased request for services

Despite the decrease in requirements for most key service providers through 2020, demand for data and software development positions has increased. Data and software development positions grew by 1% and 8%, respectively, during the first few months of the crisis, with data engineering positions increasing by 6% once lockdown limits were announced. The biggest noteworthy spike, however, happened before the coronavirus was widely known, with demand for IT positions increasing by 93% in January 2020 when compared to December of the previous year.

Aside from the increased need for software services, low-code development methods are also getting more popular. While there is concern that new user-friendly software platforms would reduce demand for software engineers, it is feasible that these technologies could increase the value of conventional developers’ labor. Whether it’s reading and publishing data, organizing data storage, or dealing with hosting or logins, low-code systems can handle the basics while developers focus on their more specialized tasks. So, with increased demand for low-code tools and conventional software developers as a result of the pandemic, this can only be positive for the software business in the future.

3. Increased digital expenditures

70% of startups decided to increase or maintain expenditures in digital technology, while just 19% intended to decrease tech budgets. The increase in expenditure appears to be accompanied by concerns about economic circumstances affecting business, with 52% of firms admitting to boosting digital spending as a result of the macroeconomic disturbance created by COVID-19. Given how disruptive the epidemic is proving to be for businesses and startups, it’s no wonder that firms are leveraging digital technology to allow employees to work from home, automate processes, and remotely help customers.

Investing in digital transformation initiatives often brings benefits. Many people claimed that previous digital transformation programs were effective based on a variety of different assessment parameters. Fintech initiatives received 19.9% of funding, distribution and services received 18.6%, and digital infrastructure received 14.8%. Although software spending was somewhat lower, 40% of firms expected to increase their software budget.

4. Increasing customer preferences

It’s no wonder that COVID-19 shook up customer behavior. From purchasing groceries online to depending on eCommerce sites and click-and-collect services, the days of leisurely in-person browsing are pretty much gone for many individuals. Startups are now expected to create attractive websites or apps that market their products and allow for remote buying.

5. Advancing tech-led healthcare solutions

Another unanticipated result of the COVID-19 pandemic was a greater role for digital technology in healthcare. From hospitals using software to give patients with contact-free healthcare services to private firms developing AI apps to alleviate some of the healthcare responsibilities, digital solutions have aided the healthcare system in quantifiable ways.

What’s the future for Tech Startups?

The number of businesses that have worked on new development products in fintech and finance has increased significantly. Startups, with a little creativity and money, can identify trends and leverage long-term technologies. What are the main industries to monitor, and can an industry like fintech continue to stimulate the economy and offer the tools we need to recover from the pandemic’s impact?

  • Building a significant social impact will be critical.
  • Customer service will be a big issue for the majority of startups.
  • AI will be used more prominently by tech startups.
  • Working from home or remotely will become more common.
  • New innovative and creative approaches to improving employee well-being will be implemented.
  • Resilience will become an important factor in tech startup success.

If there is turbulence in a firm, that can result from disrupted structures, routines, and capabilities. Unfortunately, planning is needed for effective crisis management, and few companies could’ve been prepared for a crisis of the size of the COVID-19 epidemic. In general, the qualities of creative startups should make them more suited to deal with the COVID-19 problem than other types of businesses. Being creative is a prerequisite for being resilient, as innovative firms continually anticipate and react to a wide range of problems. Businesses, on the other hand, may not always understand the true threat that a possible crisis event carries, and the vast majority of startups will not have been prepared for the occurrences.

The concept of a turning point for technology adoption or digital disruption is not new, but the statistics show that the COVID-19 problem is a historic turning point and that further adjustments will be necessary as the economic and human situation unfolds. It also demonstrates that important lessons may be gained from the efforts that companies have already made. One is the significance of learning, both tactically and organizationally, in the process of making particular changes to organizations. Both forms of learning will be essential in the future, as the rate of change is unlikely to diminish.


  1. Covid-19 and the technology industry (PWC)
  2. COVID-19 Pandemic: Shifting Digital Transformation to a High-Speed Gear (Pedro-Soto Acosta)
  3. How COVID-19 has pushed companies over the technology tipping point—and transformed business forever (McKinsey)
  4. Startups in times of crisis – A rapid response to the COVID-19 pandemic (Journal of Business Venturing Insights)
  5. Maximizing the impact of technology investments in the new normal (Deloitte)
  6. 5 ways COVID-19 has accelerated software development (Market Finance)

We hope this information helped you get more informed on what happened to startups during COVID-19 and what is still to happen. Whenever you feel overwhelmed, or you might need help with your project, we are here to assist you in creating your best startup and reaching success, so get in touch and let’s discuss more.


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