Startups Urge Government for Support to Stay Afloat

While many are pausing their operation due to Covid 19 lockdown, their fixed cost including rent, payroll, tax and bank loan interests are issues to worry.

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Startups Urge Government for Support to Stay Afloat

By Nikeeta Gautam

Kathmandu: Startups in Nepal have come out as one of the most vulnerable business entities affected by the Covid 19 pandemic.

Startup communities have been regularly engaged in informal conversations to discuss finding ways to save themselves from the ongoing crisis and what the government can do to mitigate the impacts.

A group of experts, investors and entrepreneurs have come to a conclusion that startups are in dire need of short-term and long-term support from the government. According to them, the government can provide its support by contributing in paying office rents, inventory costs and payrolls to support the survival of startup companies to some extent.

Small businesses suffer quickly as they have little to no cash reserve and are unable to cope with the situation created by big disruptions in their cash flows. Also, startups keep reinvesting their profit, and a situation like a current one dries their income completely. “We don’t make profits immediately. Plus, we need to reinvest whatever is earned,” says Sixit Bhatta, co- founder Tootle, a ride-sharing company.  Narottam Aryal, president, King’s College which runs business incubation centre says that main issues among startups now is the cashflow.

“Now, when government is recognising the value of startups in the economy, supporting them in the time of crisis will be essential to keep them afloat,” says Prakash Tiwari, chief investment manager of Hathway Investment Nepal Limited.

The economic crisis, which is unfolding due to the global health emergency, is holding back investors to invest in startup projects which they have pledged earlier. “Many companies might not get second round of funding which was earlier committed by the investors,” said Aryal. Experts say that arrangement short-term collateral free loans could help the startup to cope with the economic crisis afterwards. “The government should make an arrangement to enable startups to avail short-term collateral free loan,” said Tiwari.

Capital investment is another major element for the growth of startups. “Startups are like small children who are not being able to stand by themselves right now. While short term stimulus package will help them stand, creating conducive investment environment will help them grow,” expresses Bhatta.  

Companies like Foodmandu have pivoted to keep working through innovation and change; the company which delivers food is now delivering groceries. Similarly, Health at Home has been providing consulting service through phone calls for the people who have doubts on Covid 19 infection. Likewise, the e-commerce platform Sastodeal started delivery of groceries and other daily essential items immediately after lockdown. Similarly, startups like NepXpress, a cargo and courier venture, has been providing technical support to departmental stores including Salesberry to delivery daily essential item to their customers.

The severe interruption in supply chain is a challenge for a logistics company like NepXpress. According to its co-founder Sangam Singh, NepXpress is only able to deliver medicines, which is just 2 percent of its service, due to permit related problems. 

On the other hand, some startups are skeptical about their smooth operation for a significant time even after the crisis created by the Covid 19 pandemic subsides. Tootle, which has provided indirect employment to more than 35,000 riders has paused it operation. “Even after the end of the lockdown, movement of people will not be normal because of safety concerns,” says Bhatta. In contrast, there are chances more people will have to depend on ride-sharing platforms for their livelihood.  It is because most people will not be able to go to other countries to work, at least for a couple of months,” says Bhatta.

Rohit Tiwari, co-founder of Foodmario says that the service might not take off quickly after the lockdown is lifted. “I think there will be other local problems such as shortage of cooking gas and necessary items to affect our operation,” he predicts.

 

 

 

 

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