Start-ups encounter setback as corona shuts down economyThe government should provide relief to start-ups by paying salaries, say experts.
Binita Karki was processing 9,000 litres of plum wine at her newly established Pure Joy winery at Dhapakhel, targeting to have it ready for New Year's Day celebrations slated for next week when the lockdown was declared, preventing her from visiting the site and checking on the production.
“If this had happened during the winter, it would not have been a problem. But keeping it for a long time in the summer can be not good,” she said.
Karki expects to incur a loss of Rs5 million which could increase if the lockdown is extended. The raw materials she was importing from China and India have been on hold for many weeks now.
Abhishek Gurung, co-founder of online night food delivery service Bhok Lagyo, had to shut down operations following the lockdown. “Business was going well and the number of orders had increased from 50 to 60-70 daily,” he said.
Many start-up entrepreneurs like Karki and Gurung, who are engaged in production and delivery services and whose work cannot be performed off site, are pondering their next move.
Karki said that she has not been able to collect outstanding payments from her customers, and business is at a complete halt. Karki has provided paid leave to her eight employees, and she has production and office expenses that need to be taken care of.
She is planning to forego her own salary so she can use the money for essential expenses. “It might make things a little bit easier,” she said. “This situation has not only created a loss but also discouraged start-up entrepreneurs like us,” she added.
Gurung does not need to pay salaries to his delivery boys as they have gone back to their villages, and he has no outstanding payments. They can rejoin the company when they return. “The government's announcement to waive one month's rent has also provided some relief,” he said.
Kavi Raj Joshi, co-founder and CEO of Next Growth Ventures, said that the lockdown would certainly lead to job losses and closure of many start-up companies in the start-up ecosystem.
“The current situation has created a survival question for companies based on production and services targeting niche markets,” he said.
“As many start-ups are based on the bootstrap model, many companies do not have reserve cash to last them six-seven months, and this has created a survival question resulting in lay offs,” he said. "It is also hard to get investment funds in the long term as well with Covid-19 affecting the whole economy."
Joshi gave an example of Pathao which has raised funds to last till 2021, saying that start-up companies like them will not have any problem. The current crisis might also be an opportunity for many start-up entrepreneurs to learn risk management in business, he added.
Start-up entrepreneurs can also utilise this time for self-analysis to find out the major lapses and strategies to cope with a situation like this. As the situation has also spread the idea of working from home, start-ups might think about not spending money on office space and saving on expenses by working remotely.
The time can be better utilised in building networks as technology has provided many options to get connected, which can be helpful in making relations with the ecosystem, Joshi said.
He added that the government should provide relief packages for start-up entrepreneurs for the current situation. As most of the jobs are being created by small businesses, it would be a great relief for the overall start-up ecosystem if the government paid the salaries for three months. Some affected countries have already started providing relief packages to start-up entrepreneurs, he said.
The situation is stressful for entrepreneurs, Joshi said, adding that a start-up might fail, but entrepreneurship should not.