The COVID-19 recession is battering startups, with 40% of 250 startups surveyed by NASSCOM having halted business altogether. 92% of all startups have faced some level of revenue decline. Around 62% of surveyed startups are suffering revenue declines of over 40%, with 34% suffering a revenue decline of over 80%. Many startups’ very survival is uncertain, as 70% of all startups have only a 0–3 month runway, beyond which they won’t be able to stay solvent without intervention. It’s worth noting that half of the surveyed startups were in the fintech, ed-tech and health-tech sectors.
Marketing and pay cuts
Surveyed startups are cutting pay and marketing spend across their operations.
- 65% of startups mention reducing their marketing spend as a key step; 70% of B2B startups have cut their spending here
- 53% are cutting pay for employees (3 out of 4 low-revenue startups are cutting pay)
- 13% admit to laying off employees
54% of startups said they are looking into pivoting their operations into other activities entirely.
Growth and funding biggest challenges
Operationally, startups have come to a grinding halt in growing and scaling, and raising money.
- 36% of respondents said growth and business development was their biggest problem
- 28% said raising funding was the biggest problem, with over half of all startups facing issues in this area
- 21% of businesses’ main challenge is day-to-day business operations, such as getting raw material or getting payments from clients
- 15% of businesses cited the challenge of upgrading their technology and developing new products in the current climate
69% of B2B startups cite delayed payments from clients as a big issue, while B2C delivery startups are facing a shortage of personnel. Half of all startups are seeking government aid, while a little over a third are seeking loans from banks or NBFCs. 22% are looking for new investors to back them.
For mature startups, impact believed to last 8 months
Mature startups believe that the impact of the recession will last for up to 8 months, while recent entrants think it will last longer. Telecom and health-tech companies don’t expect impact to last longer than 5 months.
Fintech, ed-tech and health-tech companies expect the impact to last not more than 9–10 months. But retail, manufacturing and travel/transport startups expect a much longer upswing of up to a year.
AI and Healthcare pivots
40% of startups consider healthcare as something that might be worth getting into. 20% are interested in fintech and ed-tech. Artificial Intelligence is clearly ahead, with half of all startups interested in things like chatbots and data analytics. 22% of startups are looking at blockchain for use cases like decentralised contact tracing applications and a digital financial identity.
Startups seek govt intervention, partnerships with big companies
Startups are generally looking for tax relief from the government (as is everyone else), with 70% of startups backing deregulation and state aid. 50% of startups are looking for private companies, especially bigger established ones, to help them, in addition to being considered for more government procurement processes. 50% of startups are also looking to get waivers on utility bills and reimbursements for the salaries they’re paying.
NASSCOM recommended large government funds to get startups back on their feet, reduced compliance requirements, a local manufacturing/development program, and increased public procurement from startups, in addition to fiscal relief.