Covid-19 pandemic hits start-ups the most, says survey

The coronavirus pandemic has impacted start-ups and the micro small and medium enterprises (MSMEs) the most. A study conducted jointly by industry body Ficci and Indian Angel Network revealed that 70 per cent of start-ups have been impacted by spread of the disease.

Many of them indicated that there could be major lay-offs if the lockdown continued. It may be mentioned here even during this unlock phase, there many local restrictions.

Twelve per cent of the start-ups have shut operations and 60 per cent are operating with disruptions, said the nationwide study, which covered 250 start-ups and 61 incubators besides investors.

About 30 per cent of the companies have said that they will lay off employees if the lockdown was extended too long. Forty-three per cent of the start-ups have already initiated salary cuts in the range of 20-40 per cent over the period of April-June 2020.

With uncertainty in the business environment and an unexpected shift in the priorities of the government as well as companies, many start-ups are struggling to keep the operations going, a statement released by Ficci said.

According to the survey, only 22 per cent of the start-ups have cash reserves to meet the fixed-cost expenses for only the next three to six months. The findings show that 68 per cent have had to cut down their operational and administrative expenses.

Ficci, in its statement, said that 33 per cent of the start-ups have put the investment decisions 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 before Covid-19 hit India. “The reduced funding has led start-ups to put a hold on their business development, manufacturing activities and has resulted in loss of projected orders,” the statement said.

The industry body underlined 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.

“The start-up 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 three-six months by start-ups. The survey indicates that the Indian start-ups need an enabling ecosystem and flow of funds to continue operations,” Dilip Chenoy, secretary general, Ficci said in the statement..