Startup

How India's startup landscape changed in 2020

Although Covid-19 delivered a brutal hand to the startup ecosystem, it has also been a catalyst for many—to reimagine, reengineer and refocus

Padmaja Ruparel
Updated: Dec 14, 2020 11:03:28 AM UTC

Padmaja Ruparel is Founding Partner of IAN Fund.

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Image: Shutterstock

Until the outbreak of the coronavirus pandemic in India in March, the country’s startup ecosystem was variously described as “thriving”, “booming”, and “progressive”. India’s bourgeoning startup landscape had evolved from being in its nascent stage to become the third-largest in the world in the past two decades. The calendar year 2020 began with the Indian startup ecosystem flourishing rapidly on the back of a spectacular 2019. The country had more than 25 unicorns till January 1, 2020, and Indian startups had received $14.5 billion funding. But, then the pandemic happened.

It won’t come as a surprise to anyone that 2020 has been a black swan event of the 21st century, caused global economies to come to a standstill, with the IMF declaring a recession as bad as, or worse than in 2009.

Even India’s startup ecosystem experienced the full force of the cumulative impact of the pandemic as well as the toughest lockdowns in the country. Startups needed to downsize, reduce teams, customer issues and some had to face shut down. Prudently, several cash-strapped startups minimised their cash burn by focusing on optimising operational costs while cutting expenditures wherever possible A recent report by TiE Delhi-NCR and Zinnov, ‘Covid-19 and Antifragility of Indian Startup Ecosystem’, revealed the repercussions faced by the startup ecosystem from March to June. Around 40 percent of startups were negatively impacted, and 15 percent of them were forced to discontinue operations due to the pandemic.

In no time, the founders soon realised that to survive, and thrive, will only by keeping pace with the dynamics of the changing world. Entrepreneurs quickly responded to the situation by reimagining their businesses—how they can not only survive by pivoting or leveraging.

Although, Covid-19 delivered a brutal hand to the startup ecosystem, it has also been a catalyst for many—to reimagine, reengineer and refocus. One of the best examples is the biotech, medtech, and health care startups, which innovated to deliver solutions during the pandemic to cater to urgent medical needs. Companies like Nocca, MyLab, Bione and Redcliffe Life Sciences are a few which developed ventilators, Covid-19 testing kits and other diagnostics solutions.

Reimagination was almost the call of the day: A large number of startups pivoted by going digital. Social distancing saw a huge for digital consumption and this provided a strong tailwind to sectors such as healthcare, e-commerce, fintech, education, entertainment, etc. the need to go online and remote, became the epicentre of not only new business models catering to a changed customer behaviour. Others like travel and hospitality were severely impacted and many businesses in these sectors have grounded to a halt or moved to the graveyard, unfortunately. But now with the lockdown lifting, many of these businesses are also on a slow path to recovery with almost 75 percent of these startups slow but steady path to recovery

Covid-19 has also brought out the resilience of startups: some have not only beaten in but have grown exponentially—Unacademy, Nykaa, Postman, and Razorpay—to emerge as unicorns. And then apart from the raise by Reliance, Byju’s raised $200 million from BlackRock, T. Rowe Price while Unacademy secured US$150 million in a SoftBank-led round endorsing the digital economy. Even younger startups, like the two at IAN, have raised money and provided cash exits to their angel investors, right in the middle of the lockdown.

In Q3, India’s startup ecosystem showed signs of recovery. Young startups like Phool.co, Bizlog, Woodenstreet, etc. all raised funds during the last couple of quarters. Recently, Cars24, the Indian marketplace for second-hand vehicles, raised $200 million led by DST Global, making it the latest unicorn in the country.

The Government has been encouraging local entrepreneurs to innovate further pushing Indian startups into becoming self-reliant or Atmanirbhar. The pandemic triggered this off but in the long term this surely will help the economy.

Moreover, as per the Startup India portal, there were around 24,927 companies recognised as startups in November 2019 by the Department for Promotion of Industry and Internal Trade. And with the pandemic, India’s startup ecosystem has emerged stronger, with an almost 50 percent increase in startups as in early November 20, the DPIIT reflected 39,114 startups.

Undoubtedly, the world has been in pandemic mode for almost the entire year. 2020 was a year of anxiety and apprehensions and is ending in hope for the vaccine. But what it has also brought is new opportunities, new business models, new markets providing excellent opportunities for innovative startups to leverage and build valuable companies. The pandemic changed the way customers consume, but customers still exist and underlined that businesses aligned to customer needs, built on strong fundamentals and focused on profitability will be stable and attractive companies for customers, job seekers as well as investors.

Indian startups sailing through the 2020 crisis are a result of persistence. In the coming years, startups will bring disruptive solutions to change the way we live, consume and communicate. And these companies could well see a hockey stick growth path to keep India on track to have bred100 unicorn companies by 2025.

The writer is Founding Partner of IAN Fund

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