Indian Startups at High Risk of Funding Shortage as 70 Percent Face Financial Crisis Within Three Months

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Startups in India Need Additional Capital to Survive the Coronavirus Crisis

More than two-thirds of startups in India require additional capital to navigate the coronavirus pandemic, according to a recent industry report. The report highlights the cash crunch faced by Indian startups, with 70% having less than three months’ worth of cash runway and another 22% barely making it to the end of the year.

Impact on Startups

Cash Crunch: 70% of startups have less than three months of cash runway.
Survival Concerns: Another 22% are struggling to stay afloat, with only 8% having enough money to survive for more than nine months.
Revenue Decline: 90% of startups reported a decline in revenues.

Startups Take Dramatic Measures

In response to the crisis, many startups are considering drastic measures to stay afloat:

Pivoting Business Opportunities: 54% of respondents said they were looking to pivot to new business opportunities.
Diversifying into Growth Verticals: 40% wanted to diversify into growth verticals like healthcare.

Investors Becoming Cautious

Investors in the second-largest internet market are becoming increasingly cautious about investing in young firms:

Open Letter from VC Funds: Several prominent VC funds issued an open letter warning startups that raising new capital may become challenging in the next few months.

Additional Challenges for Startups

Some startups face additional challenges, including:

Payment Delays: More than 69% of business-to-business startups reported delays in payments from clients.
Cost-Cutting Measures: Over half of these startups had to enforce pay cuts, reduce marketing spends, or switch to lower-cost vendors.

Impact on Specific Industries

Startups operating in transport and travel sectors are severely affected:

Rethinking Business Models: 78% of respondents said they were rethinking their business models and tweaking products according to the current scenario.

Seeking Relief from Governments

Indian startups are looking for policies that ease regulations, spur government purchases, and provide relief on taxes for a few years. The Indian Finance Minister has announced a $266 billion stimulus package to help revive the economy, with details expected soon on how startups can access some of this relief.

Debjani Ghosh’s Perspective

Nasscom President Debjani Ghosh stated that "there is no country, business or living being that has not been affected by the COVID pandemic." She emphasized the need for governments to work together to protect and save human lives while supporting businesses affected by the crisis.

Conclusion

The coronavirus pandemic poses a significant challenge for Indian startups. With over two-thirds requiring additional capital to survive, it is essential for investors, policymakers, and the government to work together to provide relief and support the startup ecosystem. As one of the world’s largest startup ecosystems, India needs to address these challenges to maintain its growth trajectory.