Being a part of the start-up ecosystem for the last 2 years, I have had an opportunity to see how start-ups have gone through various challenges and encountered different scenarios at different points in time. I have personally seen start-ups starting by seeing the euphoria of the investment segment and many following the trait. For example, when Flipkart was funded, many of the new age people started similar businesses. Same with Ola and Oyo. A lot of people ventured into start-ups in the e-commerce marketplace. We slowly experienced investors losing interest in this area. Initially, many Venture Capitalists (VC) used to focus on countries that have start-ups at the later stage and this gave scope to angel investors to catch early. Later, most of the VC community people started coming early to seek better returns in the later stage of the start-ups, creating tougher times for the angels, who failed to get early exits. While this is an ongoing challenge, the COVID-19 pandemic has hit the world badly. Most of the countries in the world are in a lockdown state, resulting in the disruption of operations and production of many small, medium, and large companies. Many of the blue-collared employees, who stand at the bottom of the employee pyramid has already started losing their jobs. The same is reflecting in the USA as per the unemployment stats shared recently by the government. ( Source link: https://www.theguardian.com/business/2020/apr/02/us-unemployment-coronavirus-economy ). We are expecting a similar situation in India too. If this happens, it will disrupt the demand for various products (excluding essentials). According to the various reports that have been circulating in the last 2-3 weeks, we believe Restaurants, Travel and Tourism, Hospitality group, Aviation, Automotive, Construction, and real estate, etc., will witness extreme drop in revenue for the next 2-4 quarters. The revival of these sectors will take longer than ever imagined. While a few of them are expected to revive quickly, some will take a longer time to come back to normalcy. However, all will sustain this hardship and the revenue will increase slowly.
During this phase, start-ups will face challenges for survival. Cash is the ultimate King. We appreciate those founders, who have the courage and positivity to withstand this situation and come up with innovative ideas to move forward. I urge founders to stay strong and focus on being a leader of the future. Today governments across the world including India have been bound to declare the lockdown of various countries despite knowing that it will have a long-lasting impact on its GDP and revenue. Now it is the time to save lives and look out for the short term losses. The Central Government along with few state governments has decided to cut the salaries of all the government employees. It is a great example for most of the start-ups on how to survive in this scenario.
We are witnessing that some of the start-ups who are trying to manage the situation with the existing resources are waiting longer to get their next funding as most of the investors have put a hold on their investment options for the next 1-2 quarters as of now. Even the companies, which have received funding will experience the same scenario but may have a backup from their existing investors, who are supporting them as they have immense potential for growth in the future.
Start-ups that adopt the motto digital-first, low touch, and Capex (This has been the scenario for the last 4-5 years) using multiple technological tools will still gain an upper hand in terms of funding over those start-ups, who has not matched or partially matched the above requirement.