A survey jointly conducted by The Federation of Indian Chambers of Commerce and Industry (FICCI) and Indian Angel Network (IAN), to study the ‘impact of COVID-19 on Indian Startups’ revealed that 70 percent of businesses have been impacted, while some even shut their operations.
A total of 250 startups and 61 incubators took part in the national survey conducted by the FICCI and IAN to understand the COVID-19 impact on the start-ups.
A total of 33 percent start-ups asked investors to pause their decisions while 10 percent of start-ups claimed that their funding deals with investors are pulled back citing the reason for economic uncertainty triggered by the pandemic. It shows the Covid impact on startups India.
“70 percent of start-ups said that their businesses have been impacted by the on-going pandemic COVID-19. 12 percent of the start-ups have shut their operations and 60 percent are facing disruptions to operate”, FICCI said.
According to the survey, only 8 percent of startups received funds in line with the deals signed prior to the pandemic. This decrease in funds affected existing orders as business development and manufacturing activities were forced to be halted.
Now companies are waiting for support in the form of tax relief and other relief packages. Expecting purchase orders from the centre and state, they are hoping for monetary support in the form of grants, soft loans, or payroll grants.
The released report reveals that 44 percent of the incubators who participated in the survey said their operations have been affected by the COVID-19 pandemic. These incubators are now supporting their companies by providing virtual platforms to continue their interactions with mentors, investors, and industries amid the ongoing pandemic.
Cash reserves are an important aspect of running a business during an unprecedented crisis. The survey found out that 22 percent of start-ups have enough cash reserves to run their operations for the coming 6 months.
The scale of impact on big, medium, and small startups is huge as 66 percent of start-ups plan to cut down their operational and other important costs.
Under such bleak situations, many companies plan to layoff employees and also cut salaries, while some have already implemented pay cuts. Close to 30 percent start-ups said in a survey that they will have to lay off employees if the lockdown in their states is extended further.
Many companies who do not plan layoffs already initiated salary cuts amid the lockdown. According to the survey, 43 percent of the start-ups have already implemented salary cuts in the range of 20-40 percent during the period of April-June 2020.
The survey said that 96 percent of investors believe that the ongoing pandemic affected their existing investments. Besides, 92 percent of investors maintained that they will invest at a low scale in startups for the next six months.
When asked about investment in new ventures, 59 percent said that they would prefer to continue to work on their existing investments. While 41 percent expressed interests of trying new deals for investment.
During the pandemic, the health care sector, e-learning sector, Fin-Tech, Agri grew at unprecedented rates, which attracted more investors. A total of 35 percent said they are now looking to invest in these start-ups.
This situation fears the fall of start-up valuation by 40 percent which will affect their hopes to raise new funds. In the last few months, prominent Indian unicorns such as Swiggy, Udaan, Zomato, Uber, Paisabazaar, and other startups have announced salary cuts, and some laid off many employees in order to increase their capital.