Start-up to Shut-down

Business COVID-19

Startups in Bangalore are sinking amid the COVID-19 battle and trying to raise venture capitals after writing a joint letter to the government requesting for financial assistance. 

Yamini Chincholi

Small startups are succumbing to the lockdown without any government aid. Some are divided in their opinion on seeking government help in recovering financial losses due to the lockdown imposed due to the pandemic.

Startups and Venture Capitals had penned a joint letter called the ‘Document of Recommendations’ to the government on March 30 requesting a relief package to tackle COVID-19 related losses. They requested the government to fund 50 per cent of their workforce’s salaries for six months, provide interest-free loans from banks, and to waive off tax. 

Mohandas Pai on Twitter about startups and their joint letter:

Maneet Pej, from Mobiotics, a startup based in Bangalore said, “Mobiotics was a participant in writing the joint letter to the government on March 30. The government has not responded. I don’t expect them to respond for at least another month.”

Rajeev Jha, founder of Yuktix, another startup based in Bangalore, said, “If the Ministry of Corporate Affairs dictates an enforceable law that I have to pay all my employees, it tampers with the employee-employer contract. It is a bothersome problem. The company will treat it as an external shock.”  

He said that requesting the government for financial backup is an unprecedented move and that the government is not obligated to discharge funds. “Startups can ask to defer the compliances, give credit injections or some credit continuity. Interest on loans could be waived off. But ready and direct handouts have no precedent. Is this a special treatment they are asking for?”

Many did not take the news warmly. Here are some more Twitter reactions.

M. R. Bhat, Regional Director, Southern Region, Department of Corporate Affairs, said, “Startups have written a letter, but the amount they expect the government to cover is enormously huge. Most companies are going through Series A funding right now, and it is helping them. Some startups have been lifted by other big tech and business giants, so not many startups are actually sinking. I don’t think the government should interfere.”

Rahul Jain, from International Money Matters, said, “Startups have many ways to get out of the crisis. For example, there are investors and mergers they can consider. The government has assistance schemes for startups in the growth stage. They can fight liquidity crunch by relying on venture capitalists and co-investment funds too. The government should manage funds smartly for highly pressing needs now more than ever.”


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