October 30, 2020

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Fortunes of Start-Ups Plunge Due to COVID-19 Impact

Like in case of many other businesses, COVID-19 has struck havoc in even the Indian start-up eco-system. The scenario is very much grim. Around 90% of start-ups are facing a dip in revenues, while 30% to 40% are temporarily ceasing their operations or are on a route to closure.

Additionally, around 70% of start-ups are having a cash-runway of less than 3 months. The most impacted in the coronavirus impact on start-up is the early stage and mid-stage start-ups.

These are the findings of a month-long survey conducted by NASSCOM to study COVID 19 impact on start-up in India. As per the industry body, immediate government intervention is vital for the survival of start-ups.

The COVID lockdown has most impacted early-stage and mid-stage start-ups the most, according to the survey. But start-ups in health tech, fintech and ed-tech are experiencing growth in revenue.

The situation is not all gloom and disaster. More than half of the start-ups are seeking to pivot to new opportunities of business, diversify into growth verticals like health care and boosting focus on emerging technologies like Cloud, Internet of Things and Artificial Intelligence.

As per experts, it is a well- known fact that historically such downturns have also led to business transformations and disruptions that have opened up a plethora of opportunities to tenacious entrepreneurs. In the right way, Indian start-ups have joined forces to create solutions which would help people to survive and cope with the pandemic as well as its impact on daily life.

 

According to the report, immediate government intervention is vital for the survival of start-ups. Nearly 70% of start-ups are seeking policies that support easing of regulations and opening up of procurement by the government, while 50% of start-ups are seeking partnership opportunities and support to reimburse the immediate fixed cost.

For preventing the derailment of the Indian start-up movement and its growth trajectory,

NASSCOM gives the recommendation to the government such as access to working capital, easing of fiscal policy and compliances and funding support.

The Indian start-up sector remains the 3rd largest tech start-up eco-system in the world. It is the foundation of the innovation story of India, with over 9300 tech start-ups offering direct employment to over 4 lakh people.

Agri-tech and fintech start-ups have failed to raise the same level of funding that they did a year ago, and 80% of them are facing a crunch of funds. Over 90% of start-ups in the transport and travel industry have faced challenges in business expansion and scaling. But the silver lining in the clouds is that start-ups in the ed-tech and health-tech have seen positive growth, as per the survey.

Analysts expect little big-ticket funding for start-ups in 2020. As per experts, while risk capital is

available, the risk parameters have changed.

Venture capitalists could stay away from new ventures altogether while carefully supporting existing investments, till the market conditions improve by December or next year. The strategy with regard to merchandise also could change in the post-COVID-19 world with an enhanced focus on groceries rather than electronics.