“According to a study titled ‘Covid-19 and the Antifragility of the Indian Startup Ecosystem,’ India is on its way to having 100 unicorns by 2025, considering the effects that the covid-19 pandemic has had on the Indian start-up ecosystem.
To put it in perspective, four Indian startups, Postman, Nykaa, Unacademy and Razorpay, have become unicorns amid covid-19, despite being jolted by the pandemic, and the nation is on track to have 8 unicorns in 2020, almost the same number of additions as in 2019.
The study launched by TiE-Delhi, a global non-profit organisation supporting entrepreneurship in collaboration with Zinnov, a global management and strategy consulting company, revealed that total funding fell by 50% compared to pre-covid levels during the lockdown. As a result, around 40% of start-ups have been adversely affected and 15% have been forced to discontinue operations.
The third largest start-up ecosystem in the world was jolted by the multi-dimensional pandemic and the effect was extreme during the lockdown period from March to June 2020. However, the rate of recovery, both in demand and in investor sentiment, was faster than anticipated as the economy opened.
Mr. Rajan Anandan, President, TiE Delhi-NCR said, “Although the immediate impact of the lockdowns on the Indian startup ecosystem was severe, we have been amazed to witness how quickly Indian founders have acted to reimagine their businesses. What has been most impressive is how many startups have reduced burn and improved their unit economics very rapidly””.
According to the report, the transition to digital consumption has provided the requisite tailwind for sectors such as education, healthcare and trade, while several negatively impacted sectors such as travel, hospitality and mobility are now on a recovery path. For example, 75% of start-ups are recovering post lockdown gradually, but steadily. About 30% of startups have pivoted to new alternative revenue stream markets, while more than 55% of startups focus on profitability.
In addition, during the quarter ended in September 2020, deal activity, both in terms of overall investments and the number of specific funded startups, has recovered to pre-covid levels. Furthermore, by the end of 2020, the start-up ecosystem is expected to have 7-7.5 direct jobs and 26-28 indirect jobs in total, further cementing its recovery.
Mr. Anandan added, “Investor sentiment has also recovered quickly, and we expect the Indian unicorn club to steadily expand through 2020 and 2021. Although COVID-19 has been a major setback for the ecosystem, we believe that the changes that the pandemic has brought on will make our ecosystem much stronger, across every dimension””.
The ecosystem’s antifragility is exemplified by the courageous reaction of entrepreneurs and the ecosystem, to the confusion brought on by the pandemic, by introducing new business models in line with changing consumer needs and market conditions.
The study demonstrates the spectrum of effects on the different sectors and discusses the measures taken by entrepreneurs to reinvent their business models to minimise the impact of covid-19. Factors that reflect the revival of the ecosystem include the pickup of M&A and seed operations, as well as late-stage funding. The Indian start-up ecosystem showed positive signs of recovery in Q3: funding returned to 98% of Q1 levels, investor sentiments became positive, ticket sizes increased, the number of start-ups raising their first investment round also returned to Q1 levels, ensuring that the start-up ecosystem bounced back, with the expectation of becoming healthier and more vibrant.
Mr. Pari Natarajan, CEO, Zinnov said, “By being nimble and rapidly responding to different challenges, looking at them as an opportunity, the Indian startup ecosystem has displayed its antifragile nature. Despite the trying times, and the death of many startups, the ecosystem has played a key role in employment generation and is expected to create ~15-16 Lakhs direct jobs by 2025. There is clear evidence that India’s future is about technology, policy, innovation, and entrepreneurship””.”