How will the Covid-19 pandemic impact India’s startup industry ? In particular technology startup companies ?
Going forward, digitisation of old business models and leveraging technology to reach customers at scale will be two distance business models that we will see emerging. The digitisation thread will run right across sectors whether edtech, healthcare, hyperlocal delivery, payments, we feel that more digitisation will enable less face to face interactions. Reduced person to person interaction will be a natural fallout of Covid-19.
In the short term, there is going to be pain for startups as they struggle for cash flows. We feel cash flows will be tight or non existent for the next 12 months but in the long term, we believe that tech business will stand to gain. Tech ideas around digitisation of existing business models are likely to get traction from investors.
As a venture fund house, are you in the process of working out a strategy ?
As a VC fund, we have had detailed discussions with our portfolio. We have lived through 2001 and 2008, although the current scenario is of different dimension. We have asked them to stay focused, no expansion, no new business line, cut non essential service, increase runway by conserving cash. Basically, go by the old saying ‘cash is king’. Focus on collecting your payments and accounts receivables.
For new investments, we are looking at businesses which have sustainability. As a VC fund, we will take more time to complete a transaction, tranche out our investment in multiple cycles which will be built into our decision making.
What kind of support is needed by tech startups, from the Central and state governments, organisations like yours and other stakeholders ?
The VC community should continue to support their portfolios. This is unprecedented. Keep cash for existing portfolio then new investments. No doubt, as a result, new investments will get hit.
The government has recently launched a scheme that startups employing more than 50 people and over INR 20 crore in revenues can take a loan upto INR 2 crore from SIDBI. We feel it is a counter intuitive measure because a startup of this size is well funded and backed by multiple funds so for them getting cash or even using internal accruals won’t present as much a challenge as it for the small enterprises. It is them who need the real monetary support from the government. The government should look at measures like relaxing GST inflows and outflows for startups. In the UK, the government has given 2,50,000 pounds to all SMEs and are encouraging banks to extend loans without promoter guarantee. Something like this can also be done in India to save many small startups who may not survive in a post Covid-19 era.
Which tech startup segments will be able to leverage these challenging times, to show growth and innovation ?
Anyone helping in digitisation of existing processes. From our current portfolio, companies like Sequretek, Clootrack, Pharmarack are seeing traction. So companies in sectors like cyber security, healthcare, fitness, pharma will see business picking up amidst this crisis. Enterprises will look for platforms which can digitise interaction.
Your views / any other significant factor
Macro view: Overall things will back to track in a year. But there is likely to be a permanent shift in business dynamics across sectors. For VCs, they will now be looking for more tech solutions which are impacting things at scale rather investing in tech just for the sake of it.