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70% startups hit hard by Covid-19: Survey
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SME Times News Bureau | 06 Jul, 2020
The Covid-19 pandemic has made an unprecedented impact on the Indian
businesses, particularly small and medium enterprises (SMEs) and
startups. According to a joint survey by FICCI and Indian Angel Network
(IAN), the pandemic has hit the businesses of around 70 per cent
startups.
With uncertainty in the business environment and an
unexpected shift in priorities of the government as well as corporates,
many startups are struggling to survive, it says.
In a nationwide
survey on the 'Impact of Covid-19 on Indian Startups' involving 250
startups, 70 per cent participants said their businesses had been
impacted by Covid-19 and around 12 per cent had shut operations.
The
survey shows only 22 per cent startups have cash reserves to meet the
fixed cost expenses over the next 3-6 months, and 68 per cent are
reducing operational and administrative expenses.
Around 30 per
cent of the companies said they would retrench employees if the lockdown
was extended too long. The 43 per cent startups have already started
20-40 per cent salary cuts over April-June.
Over 33 per cent
startups said investors had put the investment decision on hold and 10
per cent said the deals had been scrapped. Only 8 per cent startups had
received funds as per the deals signed before Covid-19 outbreak, the
survey revealed.
The reduced funding has forced startups to put a
hold on business development and manufacturing activities, which has
resulted in loss of projected orders.
The survey highlights the
need of an urgent relief package for startups, including possible
purchase orders from the government, tax relief and swifter tax refunds,
and immediate fiscal support measures, including grants, soft loans and
payroll grants.
Besides 250 startups, 61 incubators and investors also participated in the survey.
While
96 per cent of investors accepted that their investments in startups
had been impacted by Covid-19, 92 per cent said their investments in
startups would continue to be low over the next six months.
Around
59 per cent investors said they would prefer to work with the existing
portfolio firms in the coming months. Only 41 per cent said they would
consider new deals.
"A comparison of priority investment sectors
before and during Covid-19 shows 35 per cent investors are now looking
at investments in healthcare startups, followed by EdTech, AI/Deep Tech,
FinTech and Agri," said the survey.
Around 44 per cent
incubators surveyed said their day-to-day operations had been
considerably hit by Covid-19. Most incubators are now supporting their
portfolio firms by providing them virtual platforms to interact with
mentors, investors and industries.
Dilip Chenoy, FICCI Secretary
General, said, "The startup 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."
Indian startups needed an enabling ecosystem and flow of funds to continue operations, the survey said.
Padmaja
Ruparel, President, Indian Angel Network & Co-Chair of FICCI
Startup Committee, said, "In these uncertain times, as investors, we
must play an important role to provide the Indian startups funding,
mentoring and hand-holding 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 startups are
provided the capital support to make it during these tough times,
Ruparel said.
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