PH startups in a bind, lack enough cash amid COVID-19

Most local startups have neither the cash nor the capacity to keep their business alive for more than 12 months if current conditions prevail, a survey showed, but it remains to be seen if the government is willing to spend on the risky venture of saving startups.

Audit firm PwC Philippines released on Tuesday a survey of 90 startup business leaders who are in e-commerce, financial technology, education

and logistics. It was done in collaboration with QBO Innovation Hub, the country’s first public-private initiative for startups.

Only 19 percent of the respondents said they have the cash to last them more than 12 months, which was also known as the runway, referring to the amount of time it takes before a startup goes out of business, assuming the current income and expenses stay the same.

Titled the 2020 Philippine Startup Survey: COVID-19 Edition, it said respondents wanted, among others, government help in getting loans with a longer grace period and relaxed credit requirements, tax incentives, equity financing and wage subsidies.

“One of the biggest challenges they have is the impact on their cash flow,” said IdeaSpace executive director Diane Eustaquio in a statement. IdeaSpace, a business incubator, is part of the public-private collaboration behind QBO.

“Quite a number of startups were not able to collect from their customers before the lockdown. Even if they get to collect, a recession may slow down projections, which were once very optimistic,” she added. In a statement read during the online release of the survey, the Department of Trade and Industry (DTI) said there would be a special emergency loan fund, but did not disclose the amount.

“We acknowledge that we have to provide assistance in funding and in finding opportunities to at least 70 percent of startups who have runways of only up to six months,” the DTI said.

Only 24 percent of the respondents in the survey have a runway of four to six months. INQ