Covid-19 Impact On Startups

The Story behind the Survival Strategies of Indian Startups during COVID-19

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COVID-19 Survival Strategies For Startups

  • As per YourStory, a business journal magazine reported, 40 percent of the Indian Start-ups have temporarily shut down their operations.
  • Industry body NASSCOM said, about 90 percent of start-ups in India saw a decline in revenues, while 30-40 percent have paused their businesses temporarily.
  •  An online business news website, Moneycontrol, said ‘approximately 70 percent of Indian startups have cash reserves that won’t even last three months’.

Indian entrepreneurs are known for their resilience, “never-say-die” and “never-give-up” spirit.


Before we proceed, the legendary boxer Mike Tyson, once said, “Everyone has a plan, till they get punched in the mouth”. And, punched most of the start-ups have been by Covid-19. Though badly battered, many refuse to be knocked down.

India, a country of diversification and land of warriors. After independence, from the year 1947 to 2020, the country had faced many challenges and difficulties. With self-determination and self- belief, the people of India have overcome the challenges.

Globally, India has the third-largest ecosystem for successful start-ups, behind the US & China. In the year 2019, Indian start-ups have raised over $11 billion. This value was 30% higher than in 2018.

According to the US-India Strategic Forum, in the next five years, they could attract investment of over $21 billion, creating thousands of indirect jobs. In February 2020, COVID-19 brings global lockdown with close borders and zero trade.

NASSCOM, a trade association of Indian Information Technology and Business Process Outsourcing industry surveyed in April to measure the impact on start-ups due to COVID-19. Over 250 start-ups of various domains ranging from healthcare, fintech, travel, were the part of the survey. The survey has raised many questions on the survival of Indian start-ups because the report said around 90 percent of the small businesses are facing a decline in revenues as the country lockdown has left them bleeding.

A Confession from NASSCOM President

Debjani Ghosh, President of NASSCOM said, “While governments have been working diligently to protect and save human lives, businesses have been hit and small businesses and start-ups have been the most affected.”

COVID-19 has developed a challenge for businesses to keep their financial wheels rotating during the pandemic due to less revenue churn and the general uncertainty in the global financial environment.

During the lockdown, startup entrepreneurs will have to implement a new set of rules and be mindful of the following aspects to alleviate risks and to survive the slowdown caused by the impact of COVID-19. 

Below Are Some Influential COVID-19 Survival Tips For Startups

1. Tracking expenses against the revenue status

During this contagion, it is of utmost essential for businesses to conduct a proper valuation of their fixed and variable expenses as well as the actual revenues. This will clarify where a company stands financially and help the entrepreneurs in planning in the current flustered market. The strategy can be implemented even when the pandemic effect settles down.

2. Checking the probability of the business model

Considering the market is changing every week and developing a worse crisis, it is imperative to reconsider the business model and reassess where your business stands as per your assumptions concerning the revenue and cost. It is also a crucial time to track current financial metrics and cash flow of the company. Be mindful of what your runway is. Businesses need to evaluate the impact on sales, collections, and credit cycles.

3. Plan policies for next 3/ 6 / 12 months

Since it is difficult to estimate how long this pandemic will last, it is important to get ready for all scenarios. If the lockdown persists for 3-months, an instant halt on variable expenditures like hiring, marketing, travel, etc. can help. However, if the crisis continues for 6 months to 12 months- entrepreneurs will have to reconfigure their business plans to reduce the variable expenses, renegotiate fixed expenses that include (rent, salaries, lease payments, etc.), and focus only on the essentials for survival. Reconsider if you need to cut or scale up on marketing costs. Some serious modifications would be required if the effect of the pandemic continues for 18 months or beyond. Businesses will need to strategize, communicate, and act with consideration. No one exactly knows how long the world has to face the effect of coronavirus, therefore a proper business survival plan for COVID-19 should be considered.

4. Be patient in securing investments

Every business needs funds to run and the question that crosses the mind of every entrepreneur in these difficult times is from where they will get the capital.  Investors in the coming days will be more vigilant and may take longer decisions on funding because investing in this current situation may not be safe to invest. But there is always hope, and we must not forget the market bounce back after the end of an epidemic crisis if we look at the previous economic downfall.

Being a third start-up provider nation of the world, India still has a huge number of people who work in small businesses. Around 4 lakhs people are employed and working with start-ups in the country.

India has always been an emerging nation for investors after China in Asia, but after the COVID-19 effect, India can leave China behind and become the land of opportunities for the investors globally.

In various reports, reported in Forbes, Techcrunch, and other sources, it has been said that the condition of an Indian start-up might upset you, but still, with few important techniques mentioned above- start-ups in India are flourishing and widespread all across the country. In India, if one company shuts down, ten more come into the business- that’s why we say the nation has the potential to strike and survive during a lockdown.


Some of the best-known names in the investor circles like Steadview Capital, who are experts in concentrated long-term investments across multiple industries, have aggressively invested in Indian enterprises despite the current stressful conditions. Steadview, in May, invested $670M in Mumbai-based beauty-turned-omnichannel lifestyle retailer Nykaa, propelling them into the start-up unicorn club.

Ratan Tata, an Indian industrialist, 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”.

Indian start-ups have the potential to unlock opportunities for survival during a pandemic situation. Small businesses in India have survived and deal with the COVID-19, also in the coming days, the market will bounce back.


 

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