About 70 pc startups impacted by COVID-19: Survey

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

The survey on the 'Impact of COVID-19 on Indian Startups' conducted by Ficci jointly with the Indian Angel Network (IAN) depicts that only 22 percent of the startups have cash reserves to meet fixed cost expenses of their companies over the next three to six months.

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

ALSO READ

How this Bengaluru-based maternity startup grew 200 percent amidst COVID-19

"The findings show that 68 percent of the startups 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.

About 43 percent of startups have already started salary cuts in the range of 20-40 percent over the period of April-June 2020, it said.

On investment front, 33 percent startups said investors have put investment decision on hold and 10 percent stated that deals have been called off. Only 8 percent startups received funds as per deals signed pre-Covid, Ficci said.

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

The survey highlights the need for an urgent relief package for startups, 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.

Besides 250 startups, 61 incubators and investors also participated in the survey. 96 percent of the investors stated that investment in startups have been impacted by COVID-19. Moreover, 92 percent of investors maintained that startup investments will continue to be low over the next six months.

59 percent of the investors said they would prefer to work with their existing portfolio companies in the coming months, and only 41 percent stated that they would consider new deals.

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