Bengaluru is known as Startup Capital of India. The ecosystem of Bengaluru’s startup is set to witness a large-scale imperilment since the outbreak of the Coronavirus crisis. It is estimated that half of the startups in the city i.e. 8000 startups may terminate their operations. The main cause is the cash crunch that draws on 50,000 job loss.
To reduce losses, big players like Swiggy, Zomato and Ola have already made an announcement of layoffs, pay cuts and furloughs. Attested by analysts, the biggest challenge for startups is to extend their runway that means to preserve cash until the situation gets normal and demand rises.
K Ganesh, a serial entrepreneur & partner of GrowthStory and a promoter of BigBasket, Portea Medical and others, stated, “Most startups are not profitable and depend upon investor capital to survive every month. In this situation, when the business has come to zero, the amount of cash they need has increased exponentially. I estimate 50% of startups will shut down in Bengaluru.” He also added, “the focus for startups right now is to survive by cutting cost, so that they are able to open up once things get normal.”
Suresh Jayaraju, CEO of Innovopod and former Senior Director of Nasscom 10,000 startups, expressed, “Pre-launch and early-stage startups constitute 70% – 80% of all startups. At least 40% of such startups will shut within a year in Bengaluru.”
According to Mohandas Pas who is a former director of Infosys and venture capitalist, around 2,000 startups may arrest their services in the city by next 3 Months. He showed his concern on it, “there will be a big shake-off. Investors will invest in companies that are doing well.”
Around 3 to 4 lakh people are employed in startups of Bengaluru and around 50,000 people are under threat of losing the job because of the unexpected crisis.
Managing partner of Windows capital, Rahul Goyal said, “early-stage startups are in a shock as they started in a rosy world. The ones who are planning to enter now will be relatively more prepared.”
The CEO of Axilor Ventures, V Ganapathy, calculated that 25% of funded startups will shut down in the city. He said, “For the majority, demand has temporarily stopped but will eventually pick up. It is about surviving until demand returns. Investors are focussing on the companies in their portfolio and on companies that have been positively impacted like in the e-commerce, healthcare, Ed-tech sectors, to enable them to meet the demand.”
Hence, investor funds are not dried up entirely but adopting the ‘wait and watch’ approach.