Impact of Pandemic and the Role of Start-Ups : Harsh Deal with Covid-19

Impact of Pandemic and the Role of Start-Ups. For any entrepreneur’s start-up the worse and the best both happen in life but to experience this, one needs to survive the odds. Currently, the world is facing the worst and everyone is hoping for the best to happen but survivors are only left a few; Covid-19 has a worse effect on the start-up and existing businesses especially. No one knew what is upcoming this year, and why would one person think to be prepared for a year with their business protocols.

But unfortunately, everyone is suffering to get back to their stable position; therefore, forgetting about any kind of growth in the existing business or start-ups and that too it will take how long to recover no one knows. Now, we have many questions in our mind about how we will do better, what is the current situation of the market, should we switch to a new start-up or not; and many other similar questions which will be answered within the topic of:

Impact of Pandemic and the Role of Start-Ups.

70% of startups have only cash reserves for 3 months

Impact of Pandemic and the Role of Start-Ups

Yes, this is the truth that most of the start-ups have the wealth reserved for only 3 months. This is not an idiotic thing to be safe for only the upcoming 3 months as this is done by most of the companies in an attempt to attain fast pace growth or some of them consider this as money rotation to keep their business running in advance. On the other hand, reserving cash for 3 months is the best method to test any new start-up because investing and holding more than that can incur an unnecessary loss of money.

As soon as the pandemic started people thought to deal with upcoming months with these reserves and some of them planned to shut down their start-up to avoid any kind of loss but to attain this many people became jobless. The most affected start-up sector is product-based or those who used to sell their products directly to consumers. Product-based start-ups suffered a huge loss due to lack of sales but on the other side they have to pay the rent, loan, salaries, electricity, and other small expenses; ultimately shut down was the only action which has been taken by 60% of product-based start-up sectors.

Those who were able to start their business with the leftover 3 months cash reserve have expelled a few of their employees, offered a 50% salary cut-off for the remaining employees, and even changed the location to reduce the rent. After all these measures, still, they are at or below the Break-Even Point of their business, i.e., no profit, just running the start-up to extract the money for their living.

Product-based companies are badly affected

Impact of Pandemic and the Role of Start-Ups

Product-based companies or we can say business to customer companies which means the companies deal with customers directly in terms of selling their products in return for some profit. You are the manufacturer of a specific kind of product and the sole seller of that product in the market. Due to the pandemic, these companies were shut down immediately resulting in a halt of income but paying the loans to a bank, paying the rent and electricity bill, salaries, and the risk of depleting the raw material quality.

If a start-up is manufacturing a specific product and selling it directly to the customers then on the backend this kind of start-up has a manufacturing plant to create the product and in the defined market they are owning a store to sell these manufactured products to the customers. The manufacturing plant and the store both have employees and large expenses but as per the pandemic guidelines of shutdown both the plant and store has been closed for a long period due to which these kind of start-up were facing huge loss and were unable to recover and resulted in winding up the business with fewer or more loss.

Though, later on, the Small Industries Development Bank of India SIDBI tried to help out the companies but their guidelines were pretty much difficult to match. Guidelines were as follows-:

  • Must have a company, a minimum of 50 employees
  • Positive net worth
  • Received findings from PE/VC/Angel funds
  • Minimum turnover of 10-60 crores (FYO 2019 and FYO 2020)
  • Incorporated < 10 years

According to these guidelines, most of the companies were unable to qualify for the funding by SIDBI, and those who were capable to qualify also dropped the plan to avoid risking their leftover savings.

Assistance Scheme for Start-ups in Covid-19

Impact of Pandemic and the Role of Start-Ups

The pandemic not only affected the entrepreneurs and existing business companies but also the Indian Economy as they are the reason for contributing to the Indian Economy in terms of taxes, employment, or foreign trades. As soon as the government realized the loss of the Indian Economy they came up to support start-ups by funding them.

SIDBI launched the Covid-19 Startup Assistance Scheme (CSAS) to share a helping hand with innovative start-ups to ensure employment and financial stability. This helping hand is not a donation of funds but a kind of loan or fund fusion with the start-ups.


To avail interim support for start-ups that have been affected adversely in their liquidity and cash flow due to the pandemic. Start-up owners can use this fund to fulfil the requirements likepayment to vendors or raw material sellers, administrative expenses, rent, bills, wages, etc.


  1. Already received funding from an alternate Investment Fund registered with SEBI.
  2. Must have a company of at least 50 employees
  3. Turnover should be 10 crores to 60 crores (FYO 2019 and FYO 2020)
  4. Positive or growing net worth
  5. Incorporated < 10 years
  6. Demonstration of innovative measure which will ensure the long run of the start-up during and after Covid-19
  7. The safety and financial stability of employees are considered by the start-ups.
  8. The founder must have invested in their own business.

Tenure of the Loan

The loan repayment has to be done in a maximum of 24 months, in addition to a moratorium period of 12 months;

which altogether makes it 36 months.

For more read: How to name your business: Business Name strategy in 2020

Entrepreneurs’ strategy to deal with the pandemic

Impact of Pandemic and the Role of Start-Ups

Expansions and Acquisitions need to be put on standby

To safeguard yourself from facing any kind of loss or failure in the start-up you need to regulate your protocols to sustain a medium workflow. If you were planning to expand your business then hold on for a few months because if you spend on expanding your business then there is a chance to incur a loss; hold on tight for a while and examine the market to find the sweet spot for expanding the market.

Limit your acquisitions and bring down the expense. It requires a little hard work but makes the startup work in a secure environment. Stocking up during the pandemic can be risky.

Logistics and Accommodation Expense Reduction

Here you need to have extremely good management to cut down your small tasks and process it in such a way that you hit the mark at the right time but a lower cost. Try covering most of the tasks in one go which will avoid unnecessary repetition and expense of performing two tasks differently.

If you have controlled your acquisitions then it will result in the reduction of storage required, so think for better accommodation which will be a perfect fit for your products.

Payout should be done catalytically instead of delays

During the downfall due to the pandemic, do not distort the relationship between the employees or the partners in terms of payments. So to deal with this, do not hold the payment rather try to release the payouts in a few instalments which will maintain a good relationship between the partners and employees.

Stop hiring

Your start-up may or may not be facing any kind of monetary loss but stop hiring new employees or skilled workers. Rather you should try to pay attention to the existing employees which will help you to create a good image of yours in front of them and stand with them when they require the most. Increase the salaries of your employees if you can. This will make them loyal and hard workers for you.

Consider improving the ongoing project

This is the best time to test your start-up more rigorously; due to the pandemic, you have a chance to test the extreme operating point for your business. If you are having any improvement projects designed for testing but unable to test due to a high workload then you should try those now, as soon as possible to examine whether your start-up will withstand the new improvements or not and how it is working.

You are reading good! Try below links, our most liked blogs:

What to expect in the future?

Impact of Pandemic and the Role of Start-Ups

If you have not started yet or just started with your start-up then this would be the most worrying question in your mind. After exploring the Impact of Pandemic and the Role of Start-Ups you must be knowing what step you have to take now; the future of start-up is definitely in a positive way but at a slower speed. It depends on you, in which sector you are going to invest; research about the market before starting anything.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.