47% of Indian startups and SMEs have less than 1 month of cash left, many out of funds already

27th April 2020, New Delhi: Coronavirus has brought the SME and Startup sector of India to its knees. The lockdown has meant that business has halted and the revenue for many small companies has partially or completely dried up. Startups and SMEs are reaching out via LocalCircles, and industry associations to the Government asking for help in tackling the situation.

LocalCircles conducted a survey among small businesses including startups, SMEs and entrepreneurs to get a pulse on how their business is doing in the middle of the Coronavirus crisis and how do they foresee their company’s health the next few quarters. The survey received over 13,970 responses from startups and SMEs located in over 90 districts of India.

The first question asked startups that in the current scenario and their current monthly operating costs, how many months of cash does their business have. 6% said they are covered for over 6 months, 23% said they have runway for 3-6 months and 24% said they only have cash for 1-3 months. 20% startups said their cash would only last them less than a month. 27% startups and SMEs said they are already out of funds.

COVID-19 impact: 47% Indian startups and SMEs have less than 1 month of cash left; Many out of funds already

In a survey conducted in the last week of March, startups and SMEs via LocalCircles had submitted various demands from the Government to help them tide through the current crisis. These included reimbursement of 50% of startup employee salaries for one month or a one-time Rs. 20 lakh grant for Government registered startups. Asks also included expediting PSU, Government and large corporate payments to startups, processing TDS refunds for FY 2019-20 within 15 days and enabling CSR funds to be deployed into startups.

Startups and SMEs were also asked at this junction, what do they see happening with their business in the next 6 months. 61% said they are looking at scaling down while 7% were looking at selling their business. 13% said they are looking at a complete shut down while only 13% said they are looking at growth.

COVID-19 impact: 74% startups and SMEs expect shutdown or scaling down of business in the next 6 months; 7% expect to sell it

Many VCs and entrepreneurs have said that the next 6 months will be very critical for the Indian startup ecosystem and thousands of people will face layoffs. The CEO of NITI Aayog had recently assured that the Finance Ministry is taking several measures to help the MSME sector and a relief package will be announced soon. Even the technology companies who have seen a spike in the usage of their platforms have not been able to translate this demand into revenue. Some entrepreneurs also believe that the lockdown will push back their startups by one to two years. Tech companies like Swiggy and Zomato have launched grocery delivery services to cope up with the loss of revenue and many other companies are trying similar things too.

LocalCircles will be writing to the Finance, Commerce and MSME Ministers as well as senior officials in Finance Ministry, DPIIT and MSME Ministry briefing them on these findings and requesting them to urgently implement measures to protect the Startups and SMEs of India.