Start-up PAUSE

15% of start-ups have halted operations because of Covid-19

THE impact of Covid-19 has been severe on the Indian start-up ecosystem during the lockdown as 15% of start-ups have halted operations.

According to a report by TIE Delhi-NCR and Zinnov, 44% of start-ups have cash runway for less than six months, 41% of start-ups have been impacted negatively, while 52% are struggling to raise capital.

The report witnessed a decline in the pace of investments, especially in April to June 2020, 48% year-on-year decline in funding and 37% year on year decline in a number of deals in the quarter.

As per the report, less than 50 start-ups raised their first round of funds in Q2 2020. There was a sharp dip in percentage share of total funding for B2C start-ups from 65% to 70% in Q1 2020 to 30-35% in Q2 2020.

The decline was even more prominent in seed and early-stage investments. More than 55% year-on-year decline in seed and early-stage while 38 years on year decline in late-stage funding in the quarter.

There was a more than 50% decrease in early and late-stage total funding in Q2 20 compared with Q1 20. Seed-stage deals dropped most at 30% in Q2 with investors majorly placing their bets on mature start-ups. Enterprise Tech, BFSI, Healthcare and Edtech combined have raised 60-65% of the Q2 funding in 2020.

The report notes that the Covid-19 impact has varied significantly by sector and several sectors have significant tailwind due to the pandemic; while others have recovered quickly.

“We do have sectors that are still deeply impacted and would recover very slowly Indian ecosystem, led by entrepreneurs, responded quickly and effectively to Covid-19 in response to rapidly evolving market dynamics, customer preferences and operating conditions,” the report said.

It says the Indian start-up ecosystem will grow from strength to strength and eight unicorns are expected for 2020. | IANS