47% Of Indian SMEs, Startups Will Run Out Of Cash Within 1 Month Including Many Out Of Funds Already: Survey

61% of responding startups are looking to scale down within the next six months, while 13% are looking at a complete shutdown

With India under an ongoing lockdown to contain the spread of COVID-19, Indian small- and medium-sized enterprises (SMEs), including startups, are struggling to stay afloat. With restrictions on movement and the sale of non-essentials, many startups’ revenue flows have either dwindled or dried up completely.

According to a survey conducted in the last week of March by community and social media platform LocalCircles, 20% of startups reported that their funds would last for less than a month, while 27% of startups and SMEs have already run out of cash.

The survey received over 13,970 responses from startups and SMEs located in over 90 districts in India. Only 6% of respondents said that they had a runway of over six months, while 23% reported that their working capital will last between one and three months.

Indian SMEs and startups may be looking at a bleak future:

  • 61% of respondents are looking to scale down within the next six months
  • 13% are looking at a complete shutdown
  • 7% of respondents expect to sell their business within the next six months
  • Only 13% of respondents expect growth

According to LocalCircle’s report, SMEs and startups in India have reached out to the government for assistance to tide them over the current crisis.

The call for help included a demand for reimbursement of 50% of startup employee salaries for one month, or a one-time INR 2,000,000 (around US$26,300) grant for government-registered startups.

Even tech companies who are experiencing a spike in the usage of their platforms have been unable to monetize the increased demand, and some entrepreneurs believe that the lockdown will push their startups back by one to two years, according to LocalCircle’s report.

Amid the COVID-19 crisis, Amitabh Kant, the CEO of Niti Aayog, the Government of India’s policy think-tank, recently announced that the Finance Ministry is taking several measures to help the SME sector, and a relief package is in the works.

Food ordering and delivery platforms Swiggy and Zomato, who have both raised funding rounds recently, have launched grocery delivery services to cope with their loss of revenue amid the crisis, while startups like Udaan, Oyo, BharatPe, Acko, Fab Hotels, Droom, UpGrad, Meesho, Curefit, and Zilingo, have resorted to massive lay-offs and pay-cuts despite the Labour Ministry’s advisory against it.

Header Image by Andrew Khoroshavin from Pixabay