As per a nationwide survey on the ‘Impact of COVID-19 on Indian Start-ups’ conducted by Federation of Indian Chambers of Commerce and Industry (FICCI), jointly with the Indian Angel Network (IAN) with 250 start-ups, 70% of start-ups stated that their businesses have impacted by Covid-19. 12% of the start-ups have shut operations and 60% are operating with disruptions. Besides the 250 start-ups, 61 incubators and investors also participated in the survey.
Has funding gone down?
On the investment front, 33% start-ups said that the investors have put the investment decision on hold and 10% stated that the deals have been called off. Only 8% start-ups received the funds as per the deals signed pre-COVID. Only 8% 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 loss of projected orders. The survey highlights the need of 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.
What do investors say?
96% of the investors stated that the investment in start-ups have been impacted by COVID-19. 92% of the investors maintained that the start-up investments will continue to be low over the next six months. 59% of the investors said they would prefer to work with their existing portfolio companies in the coming months and only 41% stated that they would consider new deals. A comparison of priority investment sectors pre and during COVID-19 shows that 35% of the investors are now looking at investments in healthcare start-ups followed by EdTech, AI/Deep Tech, FinTech and Agri.
Impact on startup operations
The survey depicts that only 22% of the start-ups have cash reserves to meet the fixed cost expenses of their companies over the next 3-6 months. The findings show that 68% of the start-ups are majorly cutting down their operational and administrative expenses. Close to 30% of the companies stated that they will lay off employees if the lockdown was extended too long. 43% of the start-ups have already started salary cuts in the range of 20-40% over the period of April-June 2020.
Padmaja Ruparel, President, Indian Angel Network & Co-Chair FICCI Start-up Committee said in a press release – “In these uncertain times, as investors, we must play an important role to provide the Indian startups funding, mentoring and handholding support to stay afloat and come out at the other end of this crisis. To that end, IAN recently announced a Debt Fund to help IAN portfolio companies raise working capital and ensure business continuity, by partnering with Debt providers. This must be replicated on a wider scale, so a larger number of start-ups are provided the capital support to make it during these tough times.”
Image source: FICCI-IAN survey