Home / Companies / Start-ups /  41% startups, Indian SMEs running out of funds with 2nd lockdown: LocalCircles

BENGALURU: Pandemic-induced lockdowns and curfews by states have brought along uncertainty, struggles and challenges for smaller startups and small and medium enterprises (SMEs), said community social media platform, LocalCircles on Thursday.

According to a recent survey conducted by the social media platform, only 22% of Indian startups and SMEs have over 3-months runway; while 41% are either out of funds or have less than one month of funds left.

Further, only 11% of the 2,140 respondents had over 6 months, and 37% claimed they had funds for up to 3 months, the survey said.

With liquidity under pressure, close to 33% of the surveyed SMEs and startups said they would reduce advertisements and new marketing initiatives, and also look at reducing operational costs.

As per aggregate response, 49% of startups and SMEs were also planning to reduce their employee compensation and benefits costs by July to sustain themselves, the survey said.

Further, only 22% of startups and SMEs see growth in their business in the next 6 months; while 59% expect to scale down, or shut operations. Of this base, close to 22% of respondents said that they are nearing a complete shutdown or will sell off their businesses in the next 6 months.

“Startups and MSMEs have been in the race for survival, especially since the onset of the covid-19 in 2020. India observed the countrywide lockdown from March 24th till September 2020, and the unlocking post that followed by the imposition of lockdown-like restrictions from April 2021. The second wave of covid-19 related lockdowns and curfews and their concomitant impact on the economy have once again brought along very few to find growth in their business and gather the necessary funds and capital to run their operations," said the LocalCircles survey.

The survey received more than 11,000 responses from over 6,000 startups and SMEs located in 171 districts of India.

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