Fledgling start-ups have suffered maximum among Indian businesses due to Covid-19 pandemic, and with uncertainty in the business environment and an unexpected shift in priorities of the government as well as the corporates, many start-ups are struggling to keep afloat.
A survey conducted by Federation of Indian Chambers of Commerce and Industry (FICCI), jointly with the Indian Angel Network (IAN) on the impact of Covid-19 on Indian start-ups found 70 per cent of them saying their businesses impacted, 60 per cent operating with disruptions while 12 per cent shutting down their operations. As many as 250 Indian start-ups participated in the FICCI-IAN survey.
According to the findings, 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, while 68 per cent of them said they were majorly cutting down their operational and administrative expenses.
Close to 30 per cent of the companies stated that they would lay off employees if the lockdown was extended too long and 4 per cent of start-ups, on the other hand, said they 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 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. The reduced funding has led start-ups to put a hold on their business development, manufacturing activities and has resulted in the loss of projected orders.
The survey highlighted 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.
Besides 250 start-ups, 61 incubators and investors also participated in the survey. Almost 96 per cent of the investors said their investment in start-ups have been impacted by the pandemic. Over 90 per cent of them said their start-up investments will remain low over the next six months. Nearly 60 per cent of investors said they would prefer to work with existing portfolio companies. Nearly a third of investors said post-Covid their investment focus would be on healthcare start-ups followed by EdTech, AI/Deep Tech, FinTech and Agri.