Study on challenges faced by Startups crucial for recovery post Covid-19

The twin policies of Make in India and Make for India aim to revitalise the Indian economy through domestic manufacturing and consumption. But most analyses have left out the role of Startup India.

The Startup India website defines the term ‘startup’ as ‘a young company which could be an entrepreneurial venture or a new business’. First announced in 2016 by the government to align with Make in India, Startup India’s primary objectives included funding support, financial incentives, incubation and facilitating industry-academia partnerships for all enterprises that meet the criteria prescribed under the GSR notification 127 (E) issued by the Ministry of Commerce and Industry.

Currently, India has the 3rd largest startup ecosystem in the world and the sector is expected to witness a consistent year on year (y-o-y) growth of 12%-15%. Startup India’s website states that India has approximately 50,000 startups as of 2018. Out of these, NASSCOM reports that roughly 9,300 startups are in the technology sector.

Challenges faced by startups

The challenges of technology startups in particular have been highlighted by NASSCOM recently. But no study has been undertaken thus far regarding the challenges faced by startups in other sectors, including hospitality and the social sector. The challenges faced by startups are diverse and vary from sector to sector.

Consider startups in the hospitality sector. Since the possibility of travel and tourism has been next to nil over the past six months, and with revival of the sector expected to take anywhere six to 12 months from now due to the apprehensions of the public regarding infection and safety, enterprises in the hospitality sector have been struggling just to stay afloat.

“We did not have major restructuring processes in the past few months; employees have also not been laid off, though they are on furlough,” says Sandeep Maitraya, Director of Crimson Hotels (P) Ltd. “But the budget has been drastically reduced by 70% for the remainder of the financial year. Several new projects planned in Nepal have been postponed too.”

“Most hotels have been shut and the ones that are open have been converted to Covid care facilities under the guidelines of the government,” opines Atul Budhraja, Vice President of Operations at Sankalp Recreation Private Limited. “Most of us have absolutely no work and no possibility of income. The workforce has been downsized by 40%-50%. In the immediate future, average occupancy is expected to be only around half of the available capacity at our establishments. The management will have to start from scratch on operational details due to the changes in travel guidelines and because of quarantine requirements.”

If startups in the hospitality industry are faring badly, social sector enterprises are in a worse state. Divya Hegde, a Founding Trustee of TIP Sessions (a social impact initiative that works in coastal Karnataka on civic awareness for sustainable development) had projects running on waste collection, segregation and management. The pandemic has increased the risks for her staff to work on the field. Anyone with Covid-19 symptoms have had to go into quarantine, which affected the ongoing projects.

However, the amount of waste generated has increased since the beginning of thelockdown, so additional workers have been hired. The financial strain from this has been exacerbated by restructuring policies for protecting vulnerable employees who cannot work on the field. New investors are risk averse. CSR funds are also not available since all private companies are practicing conservative spending for the rest of the financial year to prepare for the full economic impact of the pandemic in 2021.

Not all startups are suffering though. Those in e-learning (think Byju’s and other online learning apps), e-commerce (Grofers and Big Basket) and health spaces are flourishing. Naari (a social impact initiative in menstrual health) is a good example.

Naari’s Founder, Snigdha Ananth says that more people are engaging constructively with her sustainable hygiene and sanitation products. She has faced operational challenges from the pandemic, with vendors refusing to take on work without being paid an advance, but not financial constraints.

The government is already concerned about startups in the agriculture and allied sectors, as evidenced by the Rs 1 lakh crore financing facility that has been launched under the Agriculture Infrastructure Fund in August 2020. But the specific challenges faced by startups in each industry sector have not been clearly addressed thus far. The general approach has been to extend lines of credit and pump cash flow. But challenges for Indian startups are not just financial in nature.

Startups are sledged to become the backbone of the Indian economy. But one cannot arrive at clear policy recommendations without updated data.

It is recommended that the government launch a comprehensive study on the challenges of Indian Startups during the Covid-19 pandemic. A comprehensive analysis of the challenges of Indian startups across different sectors will be an important catalyst for reviving the economy once the pandemic is over.

(Ankitha Cheerakathil is the Executive Director-India of Institute H21, a Czech policy research organisation. Kashish Khurana is her Research Assistant)