A survey of 250 start-ups has revealed that the COVID-19 pandemic has had an unprecedented impact on the business, with 70 per cent saying that their business has been impacted, and some of them shutting operations.
The survey on the ”Impact of COVID-19 on Indian Start-ups” conducted by Ficci jointly with the Indian Angel Network depicts that only 22% of the start-ups have cash reserves to meet fixed cost expenses of their companies over the next 3-6 months.
“70% of start-ups stated that their businesses have been impacted by COVID-19. 12 per cent of the start-ups have shut operations and 60% are operating with disruptions”, Ficci said.
“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,” it added.
43% of start-ups have already started salary cuts in the range of 20-40 per cent over the period of April-June 2020, it said.
On investment front, 33% start-ups said investors have put investment decision on hold and 10 per cent stated that deals have been called off.
Only 8% start-ups received funds as per deals signed pre-Covid, Ficci said.
The reduced funding has led start-ups to put on hold their business development, manufacturing activities and has resulted in loss of projected orders.
The survey highlights the need for 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, it said. 250 start-ups, 61 incubators and investors also participated in the survey.
96 % of the investors stated that investment in start-ups have been impacted by COVID-19.
Only 7 percent of the startups said they had enough cash reserves to bear the organisation’s fixed costs for a year post lockdown (since 24 March), while 38 percent said they only had enough to last one to three months.
Here are some of the key findings of the study:
- 18 % reported having laid off staff during the pandemic
- 39 % implemented salary cuts of 21-40 %
- 23 % said there had been a salary cut of 41-60 %
- 33 % startups said the investor had put the deal on hold
- 10 % startups said that their deals had fallen though
- 12 % of the startups have reported a shutting down of their operations because of the pandemic.
Indian startups ecosystem impacted by covid 19 pandemic.
Positive impacted sectors are:
- Edtech startups, like Unacademy, Byju’s, Vedantu
- Healthtech startups,- Online consulting,
- Online Gaming startups
- B2B solution provider
Most Negative impacted sectors are:
- Food tech startups
- Fitness startups
- Hotels, tourism and Travel focused startups