59 percent Indian startups may scale down or shut off in the next six months due to pandemic: Survey

The lockdown has brought misfortune for start-ups that are suffering from cash crunch and dearth of customers. A survey by LocalCircles brings out the reality about their situation.. Just spare a few minutes in reading the article.

Situation grim for start-ups

Amid the second wave of the ongoing pandemic, 59% of Indian startups and MSMEs expect to scale down, sell off, or shut down in the next 6 months, while only 22% of startups and MSMEs will see growth in their business in the next 6 months.

The information has been revealed in a survey by the community and social media platform LocalCircles.

Which start-ups will see growth?

It is likely that the startups which see growth are involved in online sales and services, health and FMCG, or digital payments sector, many of which have seen an uptick in demand during the pandemic, the survey notes.

Startups facing severe cash crunch

Further, only 22% of startups and MSMEs have over 3-months of runway, while 41% are either out of funds or have less than one month of funds left. As per the survey, 49% of startups and MSMEs plan to reduce their employee compensation and benefits costs by July to sustain themselves. The survey received more than 11,000 responses from over 6,000 startups and MSMEs located in 171 districts of India.

Needs help from government

The survey also mentions that 88% of small businesses need the government to let PSUs provide price escalation on all MSME/small business contracts where the supply of commodities like steel, copper, etc., is involved.

Startups want the government to permit the deployment of CSR (Corporate Social Responsibility) funds into social impact startups. “The second wave of COVID has made many realise the need for more startups that are socially oriented in areas like emergency assistance, community engagement and mobilisation, health equipment support, etc.

These start-ups have never been funded by traditional venture capitalists in India and hence largely non-existent.

Making government informed

LocalCircles said it will be escalating the findings of this survey with the key central government Ministries of Finance, Commerce and MSME so that they are aware of the situation on the ground and necessary actions can be considered to provide much-needed support.

Keywords: chalgenius, start-ups, localcircles, finances, MSME, corporate, government

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