COVID-19 impacts 70% of start-ups, 12% have shut ops: FICCI-IAN Survey

COVID-19 impacts 70% of start-ups, 12% have shut ops: FICCI-IAN Survey
COVID-19 impacts 70% of start-ups, 12% have shut ops: FICCI-IAN Survey

The COVID-19 pandemic has had an unprecedented impact on the Indian businesses and more so for the SMEs and Start-ups. With uncertainty in the business environment and an unexpected shift in the priorities of the Government as well as the corporates, many start-ups are struggling to keep the operations going.

As per a nationwide survey on the ‘Impact of COVID-19 on Indian Start-ups’ conducted by Federation of Indian Chambers of Commerce and Industry (FICCI), jointly with the Indian Angel Network (IAN) with 250 start-ups, 70 per cent of start-ups stated that their businesses have impacted by COVID-19. 12 per cent of the start-ups have shut operations and 60 per cent are operating with disruptions.

Also read: Sumit Walia quits Oppo India as VP of Product and Marketing

The survey depicts that only 22 per cent of the start-ups have cash reserves to meet the fixed cost expenses of their companies over the next 3-6 months. The findings show that 68 per cent of the start-ups are majorly cutting down their operational and administrative expenses. Close to 30 per cent of the companies stated that they will lay off employees if the lockdown was extended too long. 43 per cent of the start-ups have already started salary cuts in the range of 20-40 per cent over the period of April-June 2020.

On the investment front, 33 per cent start-ups said that the investors have put the investment decision on hold and 10 per cent stated that the deals have been called off. Only 8 per cent start-ups received the funds as per the deals signed pre-COVID-19. The reduced funding has led start-ups to put a hold on their business development, manufacturing activities and has resulted in loss of projected orders. The survey highlights the need of an urgent relief package for start-ups, including possible purchase orders from the government, tax relief and swifter tax refunds. Further, immediate fiscal support measures including grants, soft loans and payroll grants need to be provided.

Besides 250 start-ups, 61 incubators and investors also participated in the survey.

96 per cent of the investors stated that the investment in start-ups have been impacted by COVID-19. 92 per cent of the investors maintained that the start-up investments will continue to be low over the next six months. 59 per cent of the investors said that they would prefer to work with their existing portfolio companies in the coming months and only 41 per cent stated that they would consider new deals. A comparison of priority investment sectors pre- and during COVID-19 shows that 35 per cent of the investors are now looking at investments in healthcare start-ups, followed by EdTech, AI/Deep Tech, FinTech and Agri.

44 per cent of the incubators surveyed highlighted that their day-to-day operations have been considerably impacted by the COVID-19. Most of the incubators are now supporting their portfolio companies by providing them virtual platforms to interact with mentors, investors, and industries.

Dilip Chenoy, Secretary General, FICCI, noted, “The start-up sector is stressed for survival at the moment. The investment sentiment is also subdued and is expected to remain so in the coming months. Lack of working capital and cash flows may lead to major layoffs over the next 3-6 months by start-ups. The survey indicates that the Indian start-ups need an enabling ecosystem and flow of funds to continue operations.”

According to Ajai Chowdhry, Chair, FICCI Start-up Committee and Founder, HCL, “The start-up sector should be viewed as a propellant for the country’s growth and a contributor to India’s vision of being Atmanirbhar. Start-ups have a huge potential to innovate. However, in the current times, the start-up companies are reeling under huge pressure owing to lack of working capital. We need to act now to save a huge number of innovations created in the last few years. And government and industry need to reach out to support them through funding and business opportunities.”

Padmaja Ruparel, President, Indian Angel Network & Co-Chair FICCI Start-up Committee, added here, “In these uncertain times, as investors, we must play an important role to provide the Indian start-ups funding, mentoring and handholding support to stay afloat and come out at the other end of this crisis. To that end, IAN recently announced a Debt Fund to help IAN portfolio companies raise working capital and ensure business continuity, by partnering with Debt providers. This must be replicated on a wider scale, so a larger number of start-ups are provided the capital support to make it during these tough times.”

Ganesh Raju, Co-Chair, FICCI Start-up Committee and Founder, TurboStart, said, “The survey results clearly indicate that the start-ups are struggling in this unprecedented time in our history. To navigate the evolving situation, start-ups must focus on cash preservation so that sufficient capital is available to ride out the crisis. While some have been able to secure new funding, others might want to consider alternative sources of funding. We have also seen a number of start-ups re-think their businesses and evolve as per the current situation. Start-ups must use their strengths in innovation to re-strategise and re-think their business.”


News in the domain of Advertising, Marketing, Media and Business of Entertainment