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Startups demand liquidity lifeline to stay afloat, Technology News, ETtech

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Illustration: Rahul Awasthi
Illustration: Rahul Awasthi

India’s startups are lobbying the government for a lifeline as they cope with an existential liquidity crisis amid a disruption of their ecosystem due to Covid-19, the national lockdown and a spiraling global market. Half of them may be forced to close if no support is forthcoming, according to one of the letters sent to the finance minister.

Startups sought loans free of interest or linked to income tax and goods and service tax (GST) refunds to meet funding needs in a March 30 letter to finance minister Nirmala Sitharaman signed by the Confederation of Indian Industry, Nasscom, Indian Private Equity and Venture Capital Association as well as leading entrepreneurs and venture capital investors. Among the 75 signatories are Kris Gopalakrishnan, Rajan Anandan, TV Mohandas Pai, Arihant Patni and Mukesh Bansal.

The startups want public sector banks and state-controlled Small Industries Development Bank of India (Sidbi), the implementing agency of the ₹10,000 crore Fund-of-Funds, to offer loans up to the full extent of the refunds they’re due.

“These refunds are undisputed… but are yet to get transferred to the startups due to various reasons,” said Siddarth Pai, founding partner of 3one4 Capital and a signatory to the March 30 joint letter.

“While these are assets on the balance sheet of the startups, what’s needed now is the translation of this to cash,” said the letter.

This will provide startups with liquidity for the near-to-short-term without stressing government resources, the note said.

“Covid crisis threatens to destroy all of the progress and future potential of our startup ecosystem in a few short months,” the letter stated. “We seek your urgent intervention to help ensure India’s startup ecosystem survives… We need the startup ecosystem to survive in order to help the economy bounce back.”

Another communication from LocalCircles, an online community platform that represents 29,000 startups and small and medium enterprises (SMEs), to the finance minster said “startups want that some or all of CSR (corporate social responsibility) funds be permitted into startups as grants”.

Companies should be allowed to invest in startups and avail CSR benefits and claim it’s CSR, the letter said. “The startup and SME community is hopeful that the government will consider these asks with the highest importance,” said the March 31 LocalCircles note. “It is critical for startups and SMEs to survive… and if nothing is done, at least 50% of them will soon be shut.” ET has seen both the letters.

Venture capital firms have issued warnings to portfolio companies and the broader ecosystem to conserve cash and tighten spending, given the worsening macroeconomic climate and meltdown of global indices. Ecommerce and food delivery unicorn startups have been struggling because of the lockdown. Some of the top startups in the country are reported to have started cutting staff costs.

“The government’s focus rightfully seems to be on health and like in the past it will come to the rescue of the startup ecosystem soon,” said Sanjay Mehta, founder, 100X. “Also, the corporate venture capitalist as an asset class has gone away due to the current situation, and any access to fresh capital in small businesses will be the only way growth will come.”

Multiple ongoing deals talks have been shelved or put on hold citing force majeure, threatening companies that don’t have adequate funding to last out the crisis, ET has reported.



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Uber signals recovery in rides as lockdown restrictions ease- Technology News, Firstpost

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 Uber signals recovery in rides as lockdown restrictions ease

(Reuters) – Uber Technologies Inc said on Wednesday trip requests were gradually picking up, but still remained significantly below prior year levels, as several countries start to lift coronavirus-led restrictions.

Trip requests are now down about 70% from a year earlier, slightly lesser than April’s 80% drop, Chief Executive Officer Dara Khosrowshahi said in a conference with Bank of America analysts.

He said the company’s rides business is improving on a week-over-week basis, adding that the surge in food-delivery orders at Uber Eats recorded in the first quarter, showed no signs of slowing in May, easing concerns of investors who thought it could be a one-off trend during the pandemic.

Ridership in Hong Kong, which has been one of the most successful cities in the world at containing the novel coronavirus outbreak, has recovered more than 80% from its coronavirus-driven lows, Khosrowshahi said.

Rival Lyft Inc also signaled a rebound in ridership on Tuesday, saying rides on its platform rose 26% in May from the previous month.

(Reporting by Ayanti Bera in Bengaluru; Editing by Amy Caren Daniel)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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