The government’s overall fiscal relief package to stimulate the economy and to protect businesses from the impact of COVID-19 have been welcomed by several businesses.
However, there was no relief specifically for startups in government’s Atma Nirbhar package. This garnered mixed reactions from the startup ecosystem.
"The best package any startup needs is thriving economy. I will prefer even more stimulus for SMEs and other large number of companies that move wheel of economy and not just startups. Every one of us is automatically ultimate beneficiary of India’s growth," said Vijay Shekhar Sharma, founder of Paytm.
He added, “To honest, I was not expecting anything for startups. We need support from the government for bringing back India’s economy and our economy is driven by small shops. Startups don’t carry the burden of India’s economy neither are the champions."
However, Nasscom president Debjani Ghosh said, “I am completely crushed with the way startups are being treated. We need to do much better for the segment”.
Echoing that sentiment was Mohandas Pai who said, “We must not let startups die and the government must keep its commitment. The whole bailout has been focused on the bottom 70 percent of the society, the top 20 percent got nothing.”
While startups did not specifically get any mention in the relief package, government officials confirmed that they were eligible to avail relief measures announced for micro, small, and medium enterprises (MSME) under this scheme.
All startups have to do is register at register as MSMEs on the Udyog Aadhaar portal. While, some VCs are advising their portfolio startups to register, other players are tallying weighing options and tallying this move will benefit them or not.
Decoding that was Siddarth Pai, founding partner, 3one4 Capital who said, "Startups who register as SMSEs cannot avail all the benefits. One of the problems that all startups in India face is that they lack access to credit. This is why startups raise equity rounds or rounds of financing in order to subsidise working capital operations. Bank and NBFC penetration for startups is very low. Even with the announcement of the 3 lakh crore credit guarantee scheme, it only applies to those MSMEs who have a loan outstanding as of February 29, 2020."
3one4 Capital estimates that out of the out of the 50,000 India startups, only 7,500 startups may have access to credit facility from a bank of NBFC. That’s the only alarming stat, a survey put together by Nasscom suggests reveals that 70 percent startups have a runway of less than three months, 90 percent startups are seeing a decline in revenue and 40 percent have temporarily closed operations. The impact can be felt on ground, with the ecosystem being flooded with massive lay-offs due to the lockdown and economic fallout.
First Published: IST