47% of Startups in India Are Left With Cash Runway Of A Month Only! [STUDY]

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The sudden outbreak of the COVID-19 has landed a lot of Indian startups and small and medium enterprises in hot water. The situation is so grave that nearly 50% of Indian startups are on the verge of collapsing.

As reported earlier many Indian startups have already laid off or furloughed most of their employees in order to survive this virus-sparked economic downturn. Now, a recent survey, which aimed to check on the health of various startups and SMEs in India have found something even more shocking!

According to a new survey conducted by the social media and community platform LocalCircles, 47% of startups and small and medium businesses in India have less than one month to be stranded without any capital left to operate. This shocking revelation shows quite clearly that the startup ecosystem in Indian has very well gone straight from booming to suffering a slow death quite tragically.

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This survey was performed in the last week of March wherein LocalCircles received over 13,970 responses from startups and SMEs located in over a whopping 90 districts of India.

LocalCircles further reported that another 23% of startups and SMEs in India, which participated in the study, said that they have only 3-6 month’s worth of breathing room left when it comes to working capital whereas 24% said that they have cash left for the upcoming 1-3 months only.

Only 6% of the Indian startups and SMEs claimed to be completely covered for the upcoming 6 six months.

Source: LocalCircles

The nationwide lockdown imposed due to the COVID-19 situation has landed most of the bootstrapped companies in rough waters. Besides not having any VC money to back them up, they are struggling with minimal to no sales during this crisis along with having to forgo any chances of raising capital in the near future as well.

The situation has worsened so badly that now various startups and SMEs have started to reach out to the Government via the LocalCircles platform and other industry associations asking for help and guidance in tackling this troublesome situation that is not seeming to go away any time soon.

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These companies via LocalCircles’ platform have submitted various demands that they want the Indian Government to fulfil so that they can tide through this current crisis.

These demands put across the Indian Government by various startups and SMEs are as follows:

  • Reimbursement of 50% of startup employee salaries for one month or alternatively, a one-time Rs. 20 lakh grant for Government registered startups.
  • Expediting PSU, Government and large corporate payments to startups.
  • Processing TDS refunds for FY 2019-20 within 15 days.
  • Enabling CSR funds to be deployed into startups.

LocalCircles also reported that 61% of Indian startups and SMBs, looking at the current scenario, are giving serious thought to scaling down their operations in the next 6 months whereas 20% are looking at either selling their business or at a complete shutdown.

Lastly, only a meagre 13% of the survey respondents confirmed that they are looking at growth in the coming six months.

Source: LocalCircles

This situation was predicted well beforehand by many industry leaders, one of them being Rutvik Dosh, the Managing Director of Inventus Capital India who previously in an interview said that startups will most likely have to merge or either fold up completely as there are no other options left.

Similarly, many other venture capitalists and entrepreneurs over the last week have also voiced their concerns in the same manner. Most of them believe that there is a high chance of another huge wave of layoffs taking place in startups and SMEs in the coming six months.

Now it remains to be seen what does the future hold for the Indian startup ecosystem post the lockdown and the COVID-19 situation. We will keep you posted on all further developments. Stay tuned!

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