38 per cent startups out of funds: Survey

4 per cent shut down business due to lockdown effect

By   |  Published: 15th Jun 2020  5:53 pm
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A survey has revealed that about 38 per cent startups have run out of funds and 30 per cent have 1-3 months of cash left, indicating the severe impact of lockdown on fledgling businesses.

According to the survey by LocalCircles — which sought over 28,000 responses from more than 8,400 startups, SMEs and entrepreneurs — 16 per cent such entities said the they have 3-6 months of cash left.

Another 12 per cent respondents said they have less than a month’s worth of cash left.
“Four per cent also said that they have already shut down the business due to the lockdown effect,” the report noted.

LocalCircles’ report assesses the impact that COVID-19 pandemic and the following lockdown have had on the startups and SMEs of India.

“Many businesses have reported a revenue drop of more that 80-90 per cent in the last two months making it hard for them to even sustain their business,” it said. The comparison from April to June 2020 showed that percentage of startups and SMEs out of funds has risen from 27 per cent to 42 per cent, showing a worrisome situation, it added.

These organisations are cutting or deferring marketing and human resource costs to sustain their business.

Interestingly, 35 per cent said they see growth in their business in the next six months and equal percentage said they would scale down.

About 14 per cent said they see their business getting shut down, while 16 per cent said they were quite unsure of the future.

Asked if they expect to be benefitted by the stimulus package announced by government, only 14 per cent said ‘yes’, while 57 per cent said ‘no’ and the remaining 29 per cent were unsure about it.

“A large number of startups might not be able to avail these benefits under the Atmanirbhar Bharat scheme even if they are registered as MSMEs. This is because a startup needs to have existing debt/loans on their books to qualify, but most startups usually opt for VC funding, which makes them ineligible for this Government scheme,” the report noted.

It added that most startups and SMEs can’t afford to chase the paper work and loans/funds for months and still sustain their business.

“The need of the hour was and is assistance that reaches bank accounts fast and fast in the context of startups and SMEs means now as 42 per cent of them are already in shut down or out of funds status,” the survey said.