Startups See Reduced Funding Due To COVID-19: Survey

A recent survey of 250 start-ups has revealed that the COVID-19 pandemic has had an unprecedented impact on the businesses, with 70 percent saying that their business has been impacted, and some others shutting operations.

The survey titled "Impact of COVID-19 on Indian Start-ups" conducted by FICCI (Federation of Indian Chambers of Commerce & Industry) jointly with the Indian Angel Network showed that only 22 percent of the start-ups have cash reserves to meet fixed cost expenses of their companies over the next 3-6 months.

"70 percent of start-ups stated that their businesses have been impacted by COVID-19. 12 percent of the start-ups have shut operations and 60 percent are operating with disruptions", FICCI said.

"The findings show that 68 percent of the start-ups are majorly cutting down their operational and administrative expenses. Close to 30 percent of the companies stated that they will lay off employees if the lockdown was extended too long," it added.

The report also said that 43 percent of start-ups have already started making salary cuts in the range of 20-40 percent over the period of April-June 2020.

On the investment front, 33 percent start-ups said investors have put investment decision on hold and 10 percent stated that deals have been called off. Only 8 percent start-ups have received funds as per deals signed in the pre-COVID period, FICCI said.

The reduced funding has forced them to put on hold their business development, manufacturing activities and has resulted in a loss of projected orders.

Besides the 250 start-ups, 61 incubators and investors also participated in the survey, and 96 percent of the investors stated that investment in start-ups has been impacted by COVID-19.

A comparison of priority investment sectors pre- and during COVID-19 shows that 35 percent of investors are now looking at investments in healthcare start-ups followed by ed-tech, AI/deep tech, fintech and agri, FICCI said.

The survey has 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, it said.