Funding on hold for nearly 33% start-ups: Ficci-IAN survey

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Published: July 7, 2020 5:01 AM

Analysts said the next set of investments will hinge on how deftly companies are able to tweak their business models and processes to meet the evolving customer needs.

Close to 30% of the companies surveyed stated that they will lay off employees if the lockdown gets prolonged.

Nearly 18% of Indian start-ups undertook job cuts to reduce costs as the Covid-19 pandemic dampened efforts to raise funds. About 68% of start-ups are also slashing administrative and operational costs to tide over the crisis, a survey jointly conducted by Ficci and Indian Angel Network (IAN) showed.

Close to 30% of the companies surveyed stated that they will lay off employees if the lockdown gets prolonged.

Nearly 33% of the start-ups said investors have put funding plans on hold and 32% said investors did not respond to the investment pitch made by companies during the pre-lockdown period. Only 8% of those surveyed have signed deal agreements and received funds. Due to lack of funds, about 35% of the start-ups have halted business development activities.

The survey captured the responses of 250 start-ups.

About 39% of the start-ups surveyed have initiated salary cuts in the range of 21-40%, around 23% are taking pay cuts of anywhere between 41% and 60%, while 11% have implemented pay cuts going up to as much as 80%. Close to 12% of the start-ups have already shut operations and 60% are running with disruptions.

Start-ups backed by deep-pocketed investors like Swiggy, Ola and Zomato have laid off employees in the recent past as the pandemic hit businesses. Apart from cutting jobs, companies like Uber are also giving up office spaces to conserve cash. The firm lately shut its Mumbai office as part of the management’s decision to shut 45 offices globally.

Analysts said the next set of investments will hinge on how deftly companies are able to tweak their business models and processes to meet the evolving customer needs.

Over 25% of investors said there is a “significant” change in investor strategy due to Covid-19 while 63% said there is a moderate revision. However, 59% of investors preferred working with existing portfolio companies till the situation improves, the survey showed.

“We have seen a number of start-ups rethink their businesses and evolve as per the current situation. Start-ups must use their strengths in innovation to restrategise their business,” Ficci start-up committee co-chair and TurboStart founder Ganesh Raju said.

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