Start-ups at a standstill due to the pandemic


Seventy percent of start-ups hit hard by the pandemic says a report.

 Swathi Nair | October 22, 2020

Durgapur: COVID 19 and the economic repercussions that accompanied it has affected start-ups due to erratic funding and fall in demand according to a recent report by FICCI and IAN. A survey of 250 start-ups conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI) along with Indian Angel Network (IAN) showed that 70 per cent of the start-ups surveyed have reported a “negative impact on the business” due to COVID-19. Twelve per cent of the start-ups have reportedly shut down their operations due to the pandemic. Their ventures are suffering huge losses in revenue and several of the projects that they began before March had to be shelved. This is a huge blow on them as they’re already operating on a shoestring budget, according to the entrepreneurs. 

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Img. Impact of Pandemic on start-up funding (Source NASSCOM Start-up Plus Survey Q1-2020)

Venture capital investments in Indian start-ups declined to $2.2 billion in the first quarter of the financial year 2020. It has been affected due to a combination of global macroeconomic uncertainty and the ongoing pandemic, says a recent KPMG’s Venture Pulse report. Lack of demand and drying up of venture capital is one of the major challenges faced by them. The prevailing uncertainty in the economic climate is further dissuading investors to invest in such ventures.  The disrupted supply chain is also adding to their woes as they now have to procure the essential bulk at extremely hiked prices that exceed their budget plans.

Arun Kumar, the founder of AKS Construction Group, which was started in 2018, in Thiruvananthapuram, Kerala said, “Sixty per cent of my clients are from the Middle East countries. Since the pandemic is a global phenomenon and the layoffs and salary cuts are taking place everywhere, it’s affecting our business. Several of our new projects had to be stalled and some had to be stopped midway. We experienced a significant downfall in revenue but the expenses have been continuously increasing”. 

He adds that their company is struggling to manage and retain employees. “Although digital platforms have helped us with advertising, it has not contributed much to the nature of our sector’s on-site presence. We’re trying to branch out into new ventures that are more effective amid the pandemic but it’s getting increasingly hard to attract investors.”

Unnikrishnan M the founder of UniqueI, a construction company based in Thiruvananthapuram said, “Three out of five on-going projects had to be stopped due to lack of capital and labour. The migrant exodus also hindered our business as we mostly rely on the low-cost labour by migrant workers.”

Sajib Sikder, the owner of Snowbites, an ice cream manufacturing unit in Dhanbad Jharkhand said he had zero sales in the months of April to July. . “The business is still extremely dull and we don’t know how long the situation is going to persist. Our productivity has also gone down due to lack of manpower but the expenses are still the same. Social media and digital platforms haven’t helped us much as a lot of misinformation was circulating on the internet that further dissuaded people from consuming ice creams. We want to branch into the dairy industry that has a more stable demand once we accumulate enough capital and manpower. We are hoping to see an upward trend in our business as the festive season is approaching and it might help to pull up the demand.”

Sasidharan R, the retired Chief Manager of Indian Overseas Bank said, “It is high time for entrepreneurs to come up with out-of-the-box solutions. They should come up with more innovative project reports that are plausible enough so that they can attract investors. Banks, especially the public sector ones, are extending their support by providing subsidies and waivers to upcoming entrepreneurs if they find the business idea feasible for the current times.” Tanima Dutta, an economics professor could’ve handled the situation better had the lockdown been more well planned. More fiscal stimulus needs to be generated by the government as that’s the only way to raise demand and our businesses will continue to suffer as long as there is a lack of demand and liquidity.” She goes on to suggest that start-ups should try and collaborate with larger brands for support, as it will not only help them revive their business but also gain valuable experience to survive in tough market conditions.