Startups on road to recovery as funding returns, customers adapt

Startups on road to recovery as funding returns, customers adapt

Though the COVID-19 pandemic affected all the sectors. Many startups saw it as an opportunity to recalibrate and revive themselves. Despite initial setbacks, it seems that the startups are on a recovery path. As per market estimates, startup funding is gradually returning to 91 per cent of pre-COVID-19 levels and about 75 per cent of Indian startups are on the road to recovery. Many feel that these numbers can be attributed to the flexibility of startups to adapt and solve challenges. As per the National Association of Software and Services Companies (NASSCOM) findings of the Start-up Pulse survey II, titled “INDIAN TECH START-UPS – On the Road to Recovery” revenue acceleration and funding has improved the cash availability with startups.

The NASSCOM survey finds that COVID-19 accelerated digital adoption and tech startups can leverage this opportunity with enterprise and SMB clients for product adoption. Greater focus on the shift to online has also created new business opportunities. As per the survey, there has been an increased interest from Venture Capitalists (VCs) and funding agencies to invest in seed early-stage start-ups. Government initiatives such as Atmanirbhar Bharat, digitalisation of India, a greater focus on sustainable business models is attracting VC interest for Indian tech start-ups. Almost 25 per cent of the surveyed start-ups have been able to raise funds or find prospective investors as compared to 7 per cent in the earlier survey. Sectors such as Edtech, Healthtech, SaaS, SMB continue to attract investor interests.

“Entrepreneurs and investors need to develop a long term perspective since solutions that address major problems will always be needed. Use of technology becomes even more relevant in this context. The government needs to be more nimble in implementing its policies. Internet penetration in rural and suburban areas is woefully inadequate. Affordable broadband anywhere anytime would have a huge impact as it can be used for healthcare, education and governance. Combining wired and wireless technologies makes this possible. BIRAC grants of Rs 50 lakh are available to biotech startups whereas those in electronics do not have such a facility. A combination of grants and investments (through VCs and incubators) at the seed stage will help startups. The government can also have a policy that creates a separate channel to procure from startups,” points out CS Murali, Chairman of the Entrepreneurship Cell, SID, Indian Institute of Science.

During the pandemic, many proptech startups also saw good growth as many property builders needed to implement technology to be more efficient. The proptech startups saw significant traction both from the business angle as well as the investment angle. “The COVID-19 induced lockdown period and thereafter has seen almost every real estate company big and small, leveraging technology to create enhanced efficiencies both in marketing as well as in construction technology. The emergence and acceptance of startups addressing ‘ sustainability’ issues too has increased. Around eight startups that we mentored have raised funding from both institutional and angel investors in the past eight months,” observed John Kuruvilla, Chief Mentor Brigade Reap.

Some market experts feel that many startups have responded to pandemic-related obstacles by adopting new business models that befit varying scenarios and customer expectations, and have explored new revenue streams. Now, with more than half of startups focusing on profitability rather than damage control and lakhs of jobs returning, the startup ecosystem is expected to revive once more.

“Despite revival, there are a few challenges ahead especially for sectors that were particularly hard during the pandemic such as the hospitality and tourism sectors. Recovery ultimately comes down to the nature of the industry, and startups in certain sectors simply cannot recover as quickly as others. Funding for startups still has not returned to pre-Covid-19 levels, therefore businesses must adopt new models that reduce cash burn, optimize efficiency for available resources, and quickly digitize to survive in the post-COVID world. On the bright side, the experience of the pandemic has shown us that entrepreneurs will adapt to whatever is thrown at them, and so we can rest easy in the confidence that the startup ecosystem can weather such challenges in the future,” remarked Ashok Kadsur, Co-Founder, SignDesk.