With 90 percent of startups seeing a decline in their revenue and 70 percent cash due to the COVID-19 epidemic, this is a scene of doom and gloom in the near term.
- Nasscom survey says 90% of start-ups are facing a decline in revenue.
- About 70% of start-ups have less than 3 months of runway.
- 30-40% of start-ups have temporarily ceased operations or are in the process of being shut down.
- 50% of start-ups are focusing on emerging technologies like AI, IoT, Cloud.
The COVID-19 pandemic has severely affected the Indian startup space. According to a new survey conducted by India’s IT industry body NASSCOM, 9 out of 10 startups in the country are expecting lower revenue due to the outbreak, while most of them are less than 3 months old. With over 9,300 tech start-ups, India is the third-largest start-up ecosystem in the world, with 27 tech unicorns. Travel and transportation startups were reportedly the most affected. However, fintech, supply-chain management (SCM) and logistics startups are also seeing a decline in revenue. There is no country, business, or living being that has not been affected by the COVID epidemic.
The survey revealed that 30 to 40 percent of startups had temporarily or permanently stopped their operations. According to the survey, about 63 percent of startups in metro cities are facing more than 40 percent declines in revenue. With an employee base of over 4 lakhs, the start-up industry is already witnessing massive layoffs. Unicorns such as Swiggy, Zomato, Udaan have drastically reduced headcount over the past few weeks to save cash. Even more than half of those in operation reportedly want to invest in new business opportunities. Interestingly, the epidemic has negatively affected the business of companies in both rural and urban areas.
Even in the case of high-income companies, about 69 percent said they have less than 3 months of survival time, with B2C companies suffering the worst of the epidemic. In another bid to conserve cash, bidding percentages of B2B start-ups were looking to reduce marketing expenses, and 3 out of 9 revenue start-ups were also going for pay-cuts. In addition, disruptions in the value chain are being felt, most of which are concerned about the difficulty and conflict that lay in the future to find new project pipelines and scale the business. Apart from crunch funding, start-ups are also facing issues like lack of raw materials, delay in client payments and lack of customer connection due to travel restrictions.
“While governments are working hard to protect and save human life, small businesses and start-ups have been the most affected,” said Debjani.
Thankfully, the economy still has the silver lining of doom and gloom. According to the report, 14 percent of Edu-Tech, Fintech, and Health Tech startups are expected to grow despite a setback this year. Business-to-business (B2B) startups are expected to fare much better, with revenue down to only 40 percent. Emphasizing the need for immediate intervention by the government, NASSCOM has also recommended creating a Deep Tech Investment Fund for start-ups similar to the Fund of Funds (FoF) and expediting disbursement of Start-up India funds. It has also made some fiscal recommendations such as exemption in loan interest payments, ending provisions related to angel tax, expediting tax refund, reduction in GST rates, among others.