Many Indian startups and small businesses are running out of cash fast, a new survey shows

• According to a recent survey by LocalCircles which covered over 8,400 businesses, only 16% said that they have 3-6 months of cash left.
• With revenues down to zero or running at minimal levels, startups have been cutting jobs, salaries to sail through the crisis. But that might not be enough.
• The survey showed that even with Unlock 1.0 and businesses opening up across the country, businesses had little hope of recovery.

India’s startups and small, medium enterprises are struggling to survive from the coronavirus crisis. With revenues down to zero or running at minimal levels, startups have been cutting jobs, salaries to sail through the crisis. But that might not be enough.

Out of funds

According to a recent survey by LocalCircles which covered over 8400 businesses, only 16% said that they have 3-6 months of cash left, 30% said they have 1-3 months of case left, 12% said they have less than a month’s worth of cash left while 38% said they are out of funds already.

Earlier, Vani Kola, MD of Kalaari Capital, in an interview with Business Insider, had warned about this happening. “The same rules won’t apply anymore. Earlier, we used to tell our portfolio companies to have a 12-month cash flow all the time. But companies may now see that as just a ‘six month buffer’,” she had said.

An 80% cut in marketing and operational costs has not eased the cash crunch.

Uncertainty runs high

The survey showed that even with Unlock 1.0 and businesses opening up across the country, businesses had little hope of recovery. “35% saw growth while 35% said they would be scaling down. 14% said they see their business getting shut down while 16% said they were quite unsure of the future,” said the survey.

However, the spirits are definitely higher than what it was in April. “The comparison between April and June 2020, shows that the percentage of startups & SMEs seeing growth in the next 6 months has risen from 13% to 35%, indicating that some startups have found new revenue streams or markets and therefore 35% now see growth,” said the survey.

To garner revenue, several startups and businesses have piloted to survive. MakeMyTrip, the leading travel aggregator, entered the food delivery business, retailers like BIBA, who were known for their ethnic wear, have begun selling sleepwear and loungewear whereas Ab InBev (the company behind Budweiser) has ventured into fashion retail for additional income. Meanwhile, ride hailing giant Uber is now betting on grocery and packages delivery in India through its new venture – Uber Connect.

Startups had been hopeful of a silver lining from the government which came through for MSMEs.

And even though the government announced a ₹ 3 lakh crore emergency credit line to the MSME, most startups registered as MSMEs will not be able to avail the loan. “This is because a startup needs to have existing debt/loans on their books to qualify, but most startups usually opt for VC funding, which makes them ineligible for this government scheme,” said the report.

Here’s where the need for more India-specific funds arise. “We have to create Indian VC (venture capital) firms. We have to create Indian funds that are billion dollars or ten billion dollars. The wealth is there, you know, whatever data we have shows that you know, maybe two trillion to three trillion dollars of wealth is there in private hands in India. So some of that has to actually flow into this ecosystem,” believes Infosys co-founder Kris Gopalakrishnan.


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