Coronavirus lockdown-hit startups face cash crunch

A nationwide survey on the impact of Covid-19 on 250 Indian startups has found that nearly a fourth of them have cash reserves to meet expenses for up to six months, while almost one in three said they will lay off employees if the lockdown drags on.

Over 43% of startups said they have already started cutting salaries in the range of 20%-40%.

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According to the survey conducted jointly by the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Indian Angel Network (IAN), 33% of startups said that investors had put investment decisions on hold, while 10% stated that deals have been called off.

Only 8% of startups received the funds as per the deals signed before the outbreak of the pandemic. The reduced funding has forced startups to put on hold their business development, 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 include grants, soft loans and payroll grants.

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

At least 59% of the investors said they would prefer to work with their existing portfolio in the coming months, while only 41% said they would consider new deals.