Effects of corona-virus on the Indian startup ecosystem

Arya Singh Thakur
Jan 20, 2021 · 5 min read

The business world is bleeding. Startups bear the brunt of novel-corona-virus. How the pneumonia-like disease is choking economic lungs. COVID-19 and the crashing economy. Such headlines have been flooding news feeds for a while now, our world is suffering for real.

Bangalore: start-up hub of India

The Indian Star-up ecosystem and its Keepers

With the black swan of 2020 swimming in, India has seen no exception to the drowning world economic rates. The current scenario has actually made the world’s 3rd largest startup-ecosystem churn its head. 32 Unicorns, 28000+ recognized establishments, a flourishing ecosystem did lose their fundraising potential. In March 2020 it dropped by 81.1%! The value of investments went from $1.73 billion as of March 2019 to $0.33 billion in a span of one year. Also halting decisions made by investors, led to a total fall of 50% in the number of companies funded.

Moreover, a recent nationwide survey, conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI), and Indian Angel Network (IAN), conveys 33% of investment decisions being on hold, with 10% of deals getting called off. Only 8% of startups received funds as per the deals signed before the pandemic. 96% of the investors mentioned investments got affected by COVID-19. When 92% suggested investments will continue to be low over the next 6 months. Further, for upcoming months, only 41% of capitalists showed interest in new ventures. When 59% showed an inclination towards working with their existing portfolio companies. Meanwhile, the shift in investment priority benefited healthcare, e-commerce, ed-tech, home entertainment, essential service providers the most

Viewing investment trends in such figurative detail induces a better understanding of the happening. Funding, and government, corporate support are the main drivers of Indian startups.

Funding Indian startups is like a global phenomenon in 2020. The world cherishes the behoof of this industry in India; bringing help from national and international leads.

Looking at some examples. Department of Animal Husbandry and Dairying held a competition in association with Startup India. The dept. planned to award each of the top five capable startups with a mammoth endowment. Small Industries Development Bank of India launched schemes to uplift. They aimed at fulfilling capital needs for small to medium-sized businesses. 26 states in the country implemented several policies to help out the growth of start-ups. Majority of them centered around financial help.

On the global front; Facebook partnered up with Startup India to disburse cash grants of 50 thousand USD each, for the top 5 startups selected. The 10000 Women program by Goldman Sachs aims to uplift women entrepreneurs with education, mentorship, and capital. While Microsoft’s Ventures Accelerator Program recently picked up 16 Indian startups, to help them increase their growth rate.

With such crisis; pondering is natural
With such crisis; pondering is natural
with such a crisis; pondering is natural

The present state — bad and good

It’s evident our loss has been severe, and we won’t be getting back, at the same speed, as of falling. Corona-virus has brought in many challenges to conquer. Declining fund sources, demand-supply-chain disruption, economic uncertainty, limited workforce, lack of working capital, unstable plans and the list goes on. All such reasons harmed the Indian startup-ecosystem; despite the aids made possible.

Furthermore, numbers proposed by FICCI and IAN survey creates a clearer image. Around 70% of India’s start-ups faced serious suffering. 12% closed down their operations for time being while 60% operates with disruptions. Moreover, about 30% of companies plan to lay off employees if the lock-down extends. 68% are already cutting down operational and administrative expenses to cope up when as many as 43% of them took up to salary cuts. Only 22% of start-ups claim to have cash reserves, serving for the unexpected current need.

Considering types of the sector. B2C and travel, transport startups are the worst hit. Not only the quarantine measures but monetary aspects too affected them. A desperate need for improving the fund-flow rate and eased policy-terms will sustain. Until the majority of startups pass through the eliminator filter.

Indian markets are very versatile in nature. It’s not surprising to see, even in times of such bleak hope; there are signs of good growth for many sectors. Like, for ed-tech startups with 14% of firms reporting increased revenue. For B2B startups lesser revenue-drop prevailed. For tech-service startups, in technologies of artificial intelligence, block-chain and IoT demand are high. For healthcare and health-tech startups getting immense push-up. For home-entertainment and doorstep delivery services showing high consumption. For agriculture and many more sectors providing “essential service” or supporting e-commerce pathways.

All in all, it seems legit to call this period of 6 months a crossroad for the Indian start-up ecosystem. Where, fresh opportunities and sudden problems kept testing this thriving, emerging mega power.

From ENTRACKR.com

It’s gripping, how a recent week-funding report puts more light on how we have been. 23 Indian startups raised funding from 31st August to 5th September. Of which 20 received a total sum of $566 million. Among them, ed-tech startup Unacademy took the highest bid of $150 million, followed by another online-education platform Eruditus bagging $113 million. Livespace an online home decor startup made up to 3rd place with an amount of $90 million. Other fundraisers include music app Gana, food-tech unicorn Zomato, delivery service Dunzo, real money gaming platform WinZO Games, on-demand Healthcare service Mfine, Saas-based digital publishing startup Quintype, AI-based startups Entropik and Aibono, Y-combinator backed startup Bikayi, solar software startup SenseHawk, travel protection provider Railofy, dating platform Trulymadly, consumer electronics product brand boAt, electric vehicle startup Ultraviolette Automotive, professional network for India’s grey and blue-collar workers Apna.co, online home interior design platform HomeLane, Koye, Trukky, Nirmata, and Virtual Forest. The money-flow trend followed last week shows a sight of amelioration.

Conclusion

Le Indian Startup Ecosystem*: I’ve Got This

It’s a no-brainer to judge present-day circumstance, after knowing all these business digits. The bold, crystal-clear image indicates how devastating has been the impact of corona-virus. With all its intellect put-in, India’s start-up ecosystem is struggling with something inevitable; by laying out all kinds of coping mechanisms determined to float and rise. Amidst all the unimaginable mishap, our nation’s start-ups have been striving to adapt. To save the future from long-term effects, this ecosystem needs to empower now. The divergent nature espoused by startups shows strength to outlast the adversities. What they will evolve into, will remain to shape them for a more fruitful tomorrow.

After all, a huge recession-wave which is difficult to surf on; Restructures stuff giving a powerful and more resilient economy as the ultimate result.

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Arya Singh Thakur

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Content writing; Photography; Public relations

Heapstead Solutions

Heapstead Solutions, a solution-oriented company based out of Delhi NCR, was incepted in 2013 in the hostel rooms of the founders. Over the years Founders focused on building websites in multiple industries ranging from eCommerce to Fashion while building a strong expertise.