Sunday, May 26

70% of Indian Startups are going to collapse says Nasscom Survey

70% of Indian startups have a cash runway of less than 3 months, with early stage and mid stage startups the worst affected, a report by Nasscom said.

Revenues are squeezed for 90 per cent of over 250 startups surveyed by Nasscom in April this year.

Over 250 startups with diverse profiles participated in the survey which included 45% mid-stage startups, 30% mature startups, and 25% early-stage startups. 

The Indian tech startup ecosystem is the third largest in the world with over 9,300 tech startups, providing direct employment to over 4 lakh people.

However, the COVID-19 pandemic has come as a jolt and put the brakes on the flourishing growth story. 

As per the report, 28% of startups are hit by funding shortage which can affect long term sustainability, 21% startups are facing business operations issues like raw material shortage, client payments, lack of customer connect due to travel restriction, and 15% of startups are facing issues with technology upgradation /product development. 

69% of B2B startups cite client payment delays as a major issue with retail and fintech startups most impacted, while B2C startups in the delivery business are facing huge manpower crunch. In terms of steps taken to address the impact, 70% of B2B startups are opting for substantial marketing spend reduction, and 3 out of 4 low revenue startups are going for pay-cuts. 

The Nasscom survey finds, with 90% of startups in the transport & travel sector facing challenges in scaling business and expansion plans. A majority of mature startups are curtailing expansion plans while high revenue startups have frozen hiring. 

Nasscom is the caretaking group for Indian startups and the IT sector. 

80% of early stage startups are seeking government and NBFC (non-banking financial company) funding, with healthtech and travel & tech key sectors. Meanwhile, early stage and high revenue startups are seeking support from existing investors.  

Two-third of startups believe the COVID impact will last up till 12 months.

54% of the startups are looking to pivot to new business opportunities, 40% want to diversify into growth verticals like healthcare, and 50% are enhancing focus on emerging tech like AI, IoT, Cloud. 

While 50% of startups consider Artificial Intelligence (AI) as a big technology opportunity, 40% startups consider Healthcare as a big vertical opportunity.

The survey notes that immediate government intervention is essential for the survival of startups, with 70% of startups looking for policies that support easing of regulations and opening up of government procurement, and nearly 50% of startups looking for partnership opportunities. 

Nasscom conducted the e-survey during April 2020 and the responses received were analyzed considering various parameters like growth stages, revenues, employee strength, verticals, etc.