About 70% start-ups impacted by Covid-19, 12% shutting operations: Survey

A survey of 250 start-ups has revealed that the Covid-19 pandemic has had an unprecedented impact on the business, with 70 per cent saying that their business has been impacted, and some of them shutting operations.

The survey on the 'Impact of Covid-19 on Indian Start-ups' conducted by Ficci jointly with the Indian Angel Network depicts that only 22 per cent of the start-ups have cash reserves to meet fixed cost expenses of their companies over the next 3-6 months.

"70 per cent of start-ups stated that their businesses have been impacted by Covid-19. 12 per cent of the start-ups have shut operations and 60 per cent are operating with disruptions", Ficci said.

"The findings show that 68 per cent of the start-ups are majorly cutting down their operational and administrative expenses. Close to 30 per cent of the companies stated that they will lay off employees if the lockdown was extended too long," it added.

43 per cent of start-ups have already started salary cuts in the range of 20-40 per cent over the period of April-June 2020, it said.

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

The reduced funding has led start-ups 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 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, it said.

Besides 250 start-ups, 61 incubators and investors also participated in the survey.

96 per cent of the investors stated that investment in start-ups have been impacted by Covid-19. Moreover, 92 per cent of investors maintained that start-up investments will continue to be low over the next six months.

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

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