The Indian startup ecosystem has been drastically affected by COVID-19. This unprecedented situation has introduced a change in investment patterns.
The pandemic has surely affected the startups’ funding scenario, but with this, it has also culminated in new opportunities for startups that can sustain and adapt to the current environment.
Story So Far
The year 2019 was a boom for Indian Startups, more than 1300 startups got added to the existing numbers of startups. And with this, India continues to reinforce its position as the third-largest startup hub in the world. These startups have added around 60,000 direct jobs and 1.3-1.8 lakh indirect jobs into the pipeline, Nasscom revealed in a report.
Further, in 2019, seven Indian startups entered the unicorn club and four companies got publically listed. Talking about Ola electric who raised money at a high valuation to Icertise’s big leap in funding and Drauva’s unexpected entry in the unicorn club, all three astonished the industry in one way or the other.
The Obnoxious Guest
With all such additions in the startups, naturally the year 2020 was expected to come with more. Although the beginning was off well for startups as well as investors alike, the outbreak of novel coronavirus trampled the high spirits.
This pandemic has left most of the industries at a vulnerable stage. A considerable percentage of Indian startups are young startups that are less resilient and most vulnerable. Many of them are on the verge of devastation during this unusual economic downturn.
Steep Fall in Funding Activities in March
The pandemic has drastically affected the funding activities. According to Venture Intelligence, startup funding fell down by over 50% in March 2020 as compared to the previous month.
The widespread uncertainty among investors and consumers, decrease in demand and disruption of supply chain caused due to COVID is expected to cost the world economy a colossal $2 Trillion.
According to Datalabs, around 31% of Indian startups chose layoffs to reduce costs in this crisis. The collective expenditure of Indian startups on employee benefits amounted to $1.25 Billion in FY 2019 which is going to fall this year.
Drift of Interest
This pandemic has also introduced a change in traditional startup investment patterns. Venture capital firms have started investing over ones already operating in sectors home entertainment, FMCG, online grocery, etc. In addition to that, startups in EdTech and cybersecurity and Fintech are witnessing an unprecedented increased user demand, which in turn tracking the investors.
The Ray of Hope
This pandemic has turned everything upside-down and has not only affected the idle scenario of startups, but it has also opened new avenues to start with. Some of the companies have already molded according to the new situation. All these things somewhere show that we will see the light on the other side of the tunnel.
While it is too early to anticipate the long term impact of the pandemic, we can hope for a positive turn at the end of the year. However, expecting a positive change will require determined steps and lots of effort.