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COVID-19 impact: Start-ups clutching at straws, reveals NASSCOM survey

With 90 per cent start-ups witnessing decline in their revenue and 70 per cent of them cash strapped due to the COVID-19 pandemic, it's a scene of doom and gloom in the near-term

Rukmini Rao        Last Updated: May 20, 2020  | 02:24 IST
COVID-19 impact: Start-ups clutching at straws, reveals NASSCOM survey
70% start-ups have cash reeserves to last less than 3 months


  • NASSCOM Survey says 90% start-ups are facing decline in revenues
  • Nearly 70% start-ups have runway of less than 3 months
  • 30-40% of start-ups have temporarily halted operations or in the process of closing down
  • 50% of start-ups are enhancing focus on emerging tech like AI, IoT, Cloud

A recently conducted survey by NASSCOM of over 250 start-ups from different growth stages to assess the impact of COVID-19 virus has revealed that the coronavirus is the biggest challenge that India's nascent start-up ecosystem has ever faced. Nearly 92 per cent of them have started witnessing revenue decline, while 70 per cent of them have a runway of less than 3 months. With over 9,300 tech start-ups, India continues to be the world's third-largest start-up ecosystem having 27 tech Unicorns. In her foreword to the report, Debjani Ghosh, President, NASSCOM said, "Out of the blue, this flourishing growth saga has suddenly been hit by a roadblock, the COVID roadblock. There is no country, business or living being that has not been affected by the COVID pandemic."

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As per the report, 62 per cent of start-ups posted a revenue decline of over 40 per cent while 34 per cent said their revenue decline as high as 80 per cent, a death nail in the coffin for most. With an employee base of over 4 lakh, start-up industry is already seeing massive layoffs. Unicorns like Swiggy, Zomato, Udaan have made massive reductions in headcount to save cash over the last couple of weeks. Even in case of companies with higher revenue, nearly 69 per cent said they had less than 3 months' runway, with B2C companies facing the worst brunt of the pandemic. In a further bid to conserve cash, 70 per cent of B2B start-ups were looking at significantly reducing marketing spends and 3 out of 4 low revenue start-ups are also going for pay-cuts. Also, the disruption is being felt across the value chain with the most of them worried about difficulty and struggle that the future holds in finding new project pipeline and also scaling business. Apart from funding crunch, start-ups are also facing issues like raw material shortage, delayed client payments, and lack of customer connect due to travel restriction. "While governments have been working diligently to protect and save human lives, businesses have been hit and small businesses and start-ups have been the most affected," Debjani further said.

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Stressing the need for immediate intervention by the government, NASSCOM has recommended the creation of Deep Tech Investment Fund for start-ups similar to Fund of Funds (FoF) and also acceleration of the disbursement of Start-up India Fund. It has also made certain fiscal recommendations such as relaxation of loan interest payments, abolition of provisions relating to Angel Tax, expediting tax refunds, reduction in GST rates, among others.

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