The coronavirus pandemic has not only affected human interaction but has brought the economy to a complete halt. The impact of the crisis can be seen taking a toll on several new-age startups and SMEs who have now resorted to cost-cutting measures.
Companies like OYO, Swiggy, Meesho, Bounce, Udaan, and Paytm have either laid off their staff or have asked them to go on indefinite unpaid leave/furlough. Many have even asked their employees to take salary cuts until the company tides over the crisis. With the lockdown impacting business and affecting revenues, many small startups have reported saying that the capital in the bank has started to dry up.
According to a new survey conducted by social media and community platform LocalCircles, 47% of startups and small and medium businesses (SMEs) who participated in a survey said that they have less than one month to no capital left to operate.
The survey performed in the last week of March by the social community platform received over 13,970 responses from startups and SMEs located in over 90 districts of India.
LocalCircles said that startups and SMEs have started to reach out to the Government via its platform and other industry associations asking for help and guidance in tackling the situation.
The first question that was asked from the startups was that, in the current scenario and their current monthly operating costs, how many months of cash does their business have. While 6% said they are covered for over 6 months, 23% said they have a runway for 3-6 months and 24% said they only have cash for 1-3 months.
20% of startups said their cash would only last them less than a month. 27% of startups and SMEs said they are already out of funds.
The startups and SMEs have submitted various demands via LocalCircles from the Government to help them tide through the current crisis. These included reimbursement of 50% of startup employee salaries for one month or a one-time ₹20lakh grant for Government registered startups.
The respondents also asked for expediting PSU, Government, and large corporate payments to startups, processing TDS refunds for FY 2019-20 within 15 days and enabling CSR funds to be deployed into startups.
Startups and SMEs were also asked at this junction, what do they see happening with their business in the next 6 months. 61% said they are looking at scaling down while 7% were looking at selling their business. 13% said they are looking at a complete shut down while only 13% said they are looking at growth.
Many VCs and entrepreneurs have said that the next 6 months will be very critical for the Indian startup ecosystem and thousands of people will face layoffs.
The CEO of NITI Aayog had recently assured that the Finance Ministry is taking several measures to help the MSME sector and a relief package will be announced soon. Even the technology companies who have seen a spike in the usage of their platforms have not been able to translate this demand into revenue.
Some entrepreneurs also believe that the lockdown will push back their startups by one to two years. Tech companies like Swiggy and Zomato have launched grocery delivery services to cope up with the loss of revenue and many other companies are trying similar things too.
LocalCircles has said that it will be writing to the Finance, Commerce, and MSME Ministers as well as senior officials in Finance Ministry, DPIIT, and MSME Ministry briefing them on these findings and requesting them to urgently implement measures to protect the Startups and SMEs of India.
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