The Grim Reality Of Indian Startups: Only 12% Left With Cash Runway of Less Than One Month!

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Previously, in the month of April when the lockdown was still in effect, Dazeinfo reported how the spread of the Coronavirus pandemic was severely affecting Indian startups by causing their financial runway to keep shrinking in a rapid pace. According to the April-survey, done by LocalCircles, a whopping 47% of startups and small and medium businesses in India revealed to having less than one month to be stranded without any capital left to operate.

Now, LocalCircles, refreshed in the month of June, released a new survey which revealed an even grimmer picture of startups and small to medium businesses in India. According to the latest study, in June only 16% of startups and SMEs reported to having the cash to survive for more than 3 months.

The impact of the business slowdown combined with the almost never-ending lockdown was so severe that 38% of startups have already run out of funds, another 30% have 1-3 months of cash left, 12% respondents said they have less than a month’s worth of cash left and lastly 4% of startups have had to shut down.

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This survey has aggregated the data from over 28,000 responses from close to 8,400 startups, SMEs and entrepreneurs. When the June survey is compared to that of the April, it can be easily observed how the percentage of startups and SMEs already out of funds or shut down their business already has risen from 27% to 42% thus portraying a worrisome and alarming situation for startups in India.

Source: LocalCircles

Entrepreneurs who took part in the survey reported that many businesses happened to have observed a revenue drop of more than 80%-90% in the last two months, hence it became extremely hard for them to even try and sustain their respective businesses. Currently, the organisations which are at the end of their financial rope are cutting or deferring marketing and human resource costs to sustain their business. 

Indian Startups And SMEs On Growth Projections In The Coming 6 Months

When asked about the growth projections in the coming 6 months, interestingly, almost 35% of the participating respondents said that they definitely see growth in their business whilst an equal percentage said they will focus on scaling down. Also, 14% of respondents have mentioned that they predict their business will shut down and lastly 16% of respondents are still unsure about what the future holds for their business. 

Source: LocalCircles

It should be noted that the Cabinet, to help businesses sail through this crisis, in the month of May, approved Rs 3 lakh crore emergency credit line to the micro, small and medium enterprises (MSMEs). However, when LocalCircles asked the survey respondents if they are expecting to reap the benefits of the stimulus package announced by the government, only 14% replied with a resounding ‘yes’, while 57% said ‘no’ and the remaining 29% said they were unsure about it.

The survey report mentioned that a large number of startups in India, even if they are registered as MSMEs wouldn’t be able to avail these benefits under the Atmanirbhar Bharat Scheme because a startup needs to have existing debt or loans on their books to qualify. As most startups usually opt for Venture Capital funding they will automatically become ineligible for this Government scheme.

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Also, one must not forget that it is almost impossible for keeping on chasing the paperwork and the loans or funds while successfully being able to sustain a business. Thus, it becomes all the more difficult for startups to be benefitted by the Government scheme. As of now, the need of the hour is the kind of financial assistance that happens to reach the bank accounts fast with fewer or no hassles. But that, however, as we all know, is far from the ground reality.

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