The last two months have been extremely difficult for startups as their revenue has reached an all-time low without any source of income. The smaller startups in the country have run out of funds not including a specific government package. According to a survey by community platform LocalCircles, about 38% of startups and small and medium enterprises have run dry as compared to the 27% in April.
The survey received 28,000 responses from 8400 startups, SMEs and entrepreneurs. In this around 4% of startups reported that they have already shut down their operations. The ratio of businesses with 3-6 months of cash runaway has come down to 16% from 23% in April, which was one week into the lockdown.
A venture capitalist who is reaching out to government with the demands of startup said, “Multiple calls to the government to facilitate bailout of startups have remained unanswered.” He further added, “Making it easier for MSMEs to get loans was great for them, but not startups who banks do not lend to. It’s perplexing that the government doesn’t want to support startups that can create jobs which is the biggest requirement right now.”
The major source of revenue for startups, funding has come down significantly post the coronavirus lockdown. Even though startups have been receiving investments, the number is worryingly low. Startup data collector, Tracxn stated in its research that only 79 seed stage deals amounting to $47 million were closed between the start of April and June 5, compared to 188 deals worth $154.5 million raised by companies between April and June last year.
Nikunj Bubna, CEO of a startup called TheWowBoxsaid, “We had been working on our pre-Series-A funding deal since December last year and now that’s on hold. Our clients are FMCG companies, and large players in this space have deferred new launches, smaller players have cut their budgets, so we’ve had zero revenues.”
Even the Series A deals in the months of April-June stand at only 36 so far compared to 103 at the same time last year. There are some deals in the pipeline but that still will not make situations any better considering the entire market is collapsing due to the pandemic.