Kaviya. R
Introduction:
India is one of the countries which imposed Covid lockdown much earlier, confining billions of people in their homes. From the beginning of the lockdown, economists have been discussing the impact of Covid on the economy. Being a developing country, India had to focus on its economic stability also while battling the pandemic. India has the 3rd largest start-up ecosystem in the world and was expected to witness year over year growth at a consistent rate of 12-15% on an annual basis. But, amidst the pandemic, 70% of start-ups in India have less than three months of cash runway.
Important role played by start-ups:
India has around 50,000 start-ups and around 9000 of these are technology led start-ups. 1300 new tech start-ups were born in 2019 alone implying there were 2-3 tech start-ups born every day. These tech start-ups created 60,000 new direct jobs in 2019.Bangalore has been listed within the world’s 20 leading start-up cities in the 2019 Start-up Genome Project ranking. It is also ranked as one of the world’s five fastest growing start-up cities. This clearly shows that start-ups contribute a lot to the economy. In spite of the success rate of start-ups, their survival amidst a pandemic is a tough row to hoe.
The tough row to hoe:
According to a recent NASSCOM(The National Association of Software and Service Companies) study, out of 9,300 tech start-ups that suffer severe impact of Covid, the bigger impact is being felt by early to mid-stage start-ups. It was reported that more than 90% of start-ups were facing a decline in revenues, 30-40% of them temporarily halted their operations or in the process of closing down and 70% had less than 3 months to go out of business. Biggest tech challenge for 51% B2B start-ups is usage of remote working technologies. 70% early stage and low revenue tech start-ups are facing product development challenges. Over 80% of Agritech and Fintech start-ups and majority of early stage tech start-ups face significant funding crunch. All these have put start-ups in dire straits. But, resilience is the spirit of entrepreneurship and it is all about taking risks and being proactive.
Battle for survival:
Situations like this have always resulted in transformation of businesses. Companies, especially start-ups, need this kind of a transformation phase in order to realise their true potential. As per the report of the survey conducted by NASSCOM, 54% of start-ups were looking to pivot to new business opportunities and 40% wanted to diversify into growth verticals like health care. But the scarcity of sources for funding is another major issue. Start-ups which are unable to hold on longer will want to consolidate, and those which find value in acquiring or getting acquired can go for such consolidation. Indian Government has been supportive through its various schemes. Various initiatives like changes in labour laws, the Foreign Exchange Management Act (FEMA), Company Law; loan moratoriums and collateral-free loans to MSMEs and other measures under Atmanirbhar Bharat Scheme will benefit the Indian start-up ecosystem in the post-Covid era.
Resilience:
There is a downturn but this is a pandemic driven downturn and not an economy driven one and this pandemic has not damaged the existence infrastructure, it has only brought it to a standstill. While the going is tough, there are still opportunities for start-ups to revive their businesses as the ship has not sailed yet. Looking from a vantage point at all this, a number of industries seem to be benefiting from all this as well. This is not a survival battle for all start-ups as there are a few that took the plunge to discover and seize the opportunities amidst this recent turn of events. The new normal has brought in newfound opportunities for few sectors as there are whole new markets that were untouched before are now up for grabs. Top 8 start-up sectors likely to grow post Covid-19 pandemic are, Online education, Software as a service (SaaS) whereby applications are delivered over the Internet as a service, health and wellness, regulated financial service providers and the NBFCs, e-commerce & delivery based services, OTT platforms & online gaming, Pharma, life sciences & labs/pathology and managed office spaces. Though the future is bleak for most of us and economic growth is uncertain, these would continue to shine even in the cloudiest of weather. After when the storm passes by, these would emerge as the knowledge and industry leaders to behold.
Survival strategy:
In order to survive the downturn, start-ups have to follow a streamlined and balanced survival strategy.
Firstly, reassessment and reframing of operation plans in order to make it feasible in the current economic environment is necessary.
Instead of tapping new sources of finance, finding ways to effectively utilise the existing finance on key areas would be more beneficial.
Strategic decisions regarding costs and expenditure are the need of the hour.
While working on the survival strategy, a proper course for recovery in the long- term has to be framed after considering all the potential opportunities and threats.
Hence, start-ups have to follow the ‘Four Rs’ viz. reassess, reframe, revise, restore while being resilient.
Pioneers who seized the occasion:
There are many businesses that followed the strategy of adapting to the new normal successfully. For example, Zomato saw a decline in business since people were concerned about food safety and it put in place measures to comfort clients about the safety of its food and saw a vast opportunity. Interestingly, tourhq.com, which connects travellers with guides, saw its guides’ income freeze. To meet the challenge, they quickly pivoted and introduced “tour HQ Online Experiences” whereby interactive experiences can be enjoyed online which allow clients to feel the buzz of travelling and live experiences of safari with the guides, while, at the same time, providing those guides with much-needed sources of income. They have introduced several online and real time interactive experiences like “Harry Potter Travelogues” popular with kids, and live online interactive experiences in the local culture, music, dances, cuisine, handicrafts, etc. Curefit, a health and fitness start-up, has launched online classes as its physical fitness centres and gyms had to be closed during the lockdown and this is a big hit. These are all examples of how start-ups can reap maximum benefit out of the situation and this proves the fact that Indian entrepreneurs are known for their never-say-die attitude. As Mr. Ratan Tata said, “ups and downs in life are very important to keep us going, because a straight line even in an ECG means we are not alive”.
It is undeniable that a few start-ups which are able to adapt to the new normal through their innovations, are able to raise more funds while many other start-ups are left with a runaway of less than three months. In spite of all the survival steps that start- ups take, it is a hard truth that few entities cannot stand the impact of Covid. The only silver lining is that those who have survived this pandemic will emerge stronger, with fewer players in every sector.
Conclusion:
Even in their battle to survive, start-ups did not fail to make their contribution for the Nation. A consortium of tech start-ups named “Startups versus COVID 19” has emerged as making an important impact. Started off with a strngth of 60 entrepreneurs is now a huge body of entrepreneurs. Apart from supporting each other, they are actively helping the COVID vaccine research with tech support for telemedicine, building multistage testing procedures, scaling the manufacturing of test kits and the healthcare infrastructure. This clearly shows that there will never be a doom day as long as Indian businesses are run by such resilient and responsible entrepreneurs. As a contribution from our side, let’s take the vocal for local pledge and play our part in the revival of our economy.
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