Home Business Indian Startups hit badly; 12% startups are stating shutdown

Indian Startups hit badly; 12% startups are stating shutdown

Indian Startups hit badly; 12% startups are stating shutdown

With the increasing covid-19 cases in India and as India becomes 3rd worst hit by coronavirus now. This crisis has highly impacted Indian startups with 12% startups completely shutdown according to a survey of FICCI

The nationwide survey on the ‘Impact of covid-19 on Indian start-ups’, conducted across 250 startups, said 33% of them said that investors have put investment decision on hold, with only 22% startups stating that they need the required cash reserves left to satisfy the fixed charge expenses over subsequent 3-6 months.

Another 10% stated that deals are called off, with only 8% of startups receiving the funds as per the agreements signed during pre-covid times.

With increasing uncertainty and lack of funding, the pandemic has had an unprecedented impact on startups, leaving many of them struggling to stay the operations going.

“The startup sector is stressed for survival at the instant . The investment sentiment is additionally subdued and is predicted to stay so within the coming months. Lack of capital and cash flows may cause major layoffs over subsequent 3-6 months by startups. The survey indicates that the Indian startups need an enabling ecosystem and flow of funds to continue operations,” said Dilip Chenoy, Secretary General of FICCI.

The reduced funding has led several startups to place a hold on their business development, manufacturing activities and has resulted in loss of projected orders, the report said.

The sector through this survey highlights the necessity of an urgent relief package from the govt for startups including – tax relief and swifter tax refunds, and immediate fiscal support measures including grants, soft loans and payroll grants – to melt the blow of the impact.

“In these uncertain times, as investors, we must play a crucial role to supply the Indian startups funding, mentoring and handholding support to remain afloat and are available out at the opposite end of this crisis. thereto end, IAN recently announced a Debt Fund to assist IAN portfolio companies raise capital and ensure business continuity, by partnering with Debt providers,” said Padmaja Ruparel, president, Indian Angel Network and co-chair FICCI startup committee.

Most of the investors surveyed as a neighborhood of the survey agreed that startup investments will still be low over subsequent six months, with only 41% stating that they’re going to consider new deals in areas of healthcare start-ups followed by edtech, AI/deep tech, fintech and agri-tech businesses.

Another threat looming on the startups is ‘down-rounds’, with valuations of several startups expected to drop the maximum amount as 40%, which are currently within the market to boost new funds. consistent with management consultancy Duff & Phelps, several investors are expected to exercise their down-round protection rights which can affect other investors on the cap-table to scale back their stakes in portfolio companies.

Over the llast three months, several startups including unicorns Zomato, Swiggy, Udaan, Ola, and other startups, Lendingkart, Paisabazaar, Sharechat and Uber India have announced salary cuts also as laid off employees during a bid to extend their capital runway.

The FICCI-IAN survey now highlights that 68% of the start-ups are majorly lowering their operational and administrative expenses, and another 30% of startups are expected to get off employees if the lockdown was extended too long.

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