India’s great start-up resurgence
Covid-19 has created new opportunities for innovative startups to leapfrog into the future
Gaurav Pachauri and his colleagues had just finished a hurriedly relocated outdoor meeting at a café in central Paris last March when the first phone call came in. A major hospitality client wanted to defer their company’s mystery evaluations services to later in the year because their hotels were being closed and would remain closed indefinitely. His company had already handled postponements from their China clients, he says, but this was the first indication of the extent of the coronavirus crisis.
“We’d already begun preparing ourselves for the inevitable in December, when a workshop in Hong Kong was postponed, but we’d travelled to Spain and France for client meetings. As infection rates increased over that week in Europe, our meetings were moved out of offices and business was hit by a series of deferrals and suspensions,” says Gaurav Pachauri, President, Client Engagement and Global Partnerships at Guest Delight International (GDI). The SME, based between New Delhi and Singapore, provides globally acknowledged mystery shopping, quality assurance, and marketing research programmes to the hospitality industry in more than 100 countries.
The new Covid-19 precautions provided an opportunity to grow another area of our business by offering clients our proprietary software platform to ensure compliance at their properties.
“Those adjournments confirmed what we knew: business would only rebound in 2021. The new Covid-19 precautions provided an opportunity to grow another area of our business by offering clients our proprietary software platform to ensure compliance at their properties.”
Pachauri’s story finds echoes across India where, as in other parts of the world, start-ups were badly hit by the coronavirus pandemic. In May, the National Association of Software and Services Companies (NASSCOM), said that nine in 10 start-ups were bleeding. By July, some 17 per cent of all start-ups in a survey by the Federation of Indian Chambers of Commerce & Industry (FICCI) had ceased operations, with 68 per cent saying business had been affected.
By the end of the year, however, start-ups had recovered, with seed-stage funding hitting 90 per cent of 2019 levels. Tech-sector players did particularly well, given the accelerated adoption of digital technologies. Overall, the country’s tech start-up base grew between 8 and 10 per cent in 2020, NASSCOM said, with more than 1,600 new tech start-ups and the emergence of a record 12 unicorns — companies valued at $1 billion.
Recovery is already in Q4 2020 as a lot of deals have closed and funding is pumped up with increase in ticket size. There will be a definite recovery over the next year as the ecosystem matured last year.
“For Indian start-ups and SMEs, 2020 has been year of two halves, the first half focused on survival, while the second half was about resurgence, pivoting and realigning to new normal,” says social entrepreneur Mayank Jain, Co-founder of the for-purpose MicroX Foundation, and governing board member of World Social Entrepreneurs Organisation for India and South Asia.
“Recovery is already in Q4 2020 as a lot of deals have closed and funding is pumped up with increase in ticket size. There will be a definite recovery over the next year as the ecosystem matured last year.”
NASSCOM believes 2021 will break more records, with India likely to count over 50 unicorns this year as it marches towards creating a $1-trillion digital economy.
The rapid response to adoption of technology, digitisation and automation in various fields, the government’s support in policy making as well as the ‘vocal for local’ campaign to support small businesses, and India’s cost advantage over its global competitors help attract international customers.
Behind the resurgence
That resurgence comes down to a number of factors, says Jatin Desai, the Mumbai-based Managing Partner in Inflexor Technology Fund and Parampara Early Stage Opportunities Fund. “The rapid response to adoption of technology, digitisation and automation in various fields, the government’s support in policy making as well as the ‘vocal for local’ campaign to support small businesses, and India’s cost advantage over its global competitors help attract international customers.”
The government of India has been pushing the Make in India agenda and that is broadly favourable to entrepreneurship.
Government initiatives such as Atmanirbhar Bharat (self-reliant India), Start-up India, and the ability to register new businesses online have also helped.
“The government of India has been pushing the Make in India agenda and that is broadly favourable to entrepreneurship. Small entrepreneurs are already benefiting from various advantageous policies including single-window clearances, government funding, loan policies and tax sops,” says Raghu Ravinutala, CEO and Co-Founder of Yellow Messenger, which helps businesses build rich conversational experiences for customers and employees using artificial intelligence.
Yellow Messenger worked with the National Health Authority of India and Facebook to provide several state governments with on-demand health and safety information about Covid-19 issues using chatbots run over messaging services.
The main factors that will help lead to a post-Covid resurgence are a government push to invest in infrastructure to drive consumer spending, a stable political and economic climate, as well as financial institutional support and reduced compliance when new start-ups are experimenting during their innovation phase.
Renuka Gunjahalli, a risk-based investor in new tech platforms who is Founder and Business Consultant at Jupiter Business Mentors, expects business to return to normal by the end of 2021.
“The main factors that will help lead to a post-Covid resurgence are a government push to invest in infrastructure to drive consumer spending, a stable political and economic climate with assured and clearly defined measures to boost investor confidence, while allowing investors to invest and exit without laborious taxation and compliance mechanisms, as well as financial institutional support and reduced compliance when new start-ups are experimenting during their innovation phase – something similar to the Innovation Testing Licence in the UAE.”
Pivoting to profit
For businesses that were hit by the crisis, however, it was the ability to recognise and adapt to changing market demands that paid off.
Tina Mani, CEO and Founder of Bengaluru-based YFret, a Saas voice commerce platform for brands in retail, travel and healthcare, explains how a promised business investment was cancelled at the start of the pandemic, leading to a nine-month delay in growth plans.
The company was also forced to offer customers a 30 per cent Covid-19 discount, so revenues were hit. By the second quarter of 2020, her team had adapted its platform to contactless commerce, while staff working from home reported greater productivity without the average 1.5-hour commute.
When Covid-19 came, two things became very important: contactless shopping with the opportunity for a voice-powered kiosk, and the need to reach digital users who prefer the Hindi language to English.
“We are at the forefront of innovation in retail technology with our voice commerce product and were seeing hesitation in the market to adopt a very new customer experience. However, when Covid-19 came, two things became very important: contactless shopping with the opportunity for a voice-powered kiosk, and the need to reach digital users who prefer the Hindi language to English. ” She has now signed a significant number of new customers and sees a good sales pipeline in 2021.
It is important to accept that business has changed everywhere, and it is vital to adapt according to the changing needs of the market.
Similarly, business is still being impacted by the pandemic at Lite Bite Foods, which runs the Punjab Grill brand of restaurants in India and the UAE. Amit Burman, who is Chairman of Lite Bite Foods and Dabur Ltd, says the SME expanded its already-strong delivery operations and converted unutilised restaurant space.
“We are utilising some of our existing restaurants as cloud kitchens and also developing and investing further into our cloud kitchens, enabling us to deliver six to ten brands at a time,” he says. “Our delivery business has grown three-fold and will continue to be a main focus.”
In the third quarter, Lite Bite achieved 70 per cent of pre-Covid revenues. “It is important to accept that business has changed everywhere, and it is vital to adapt according to the changing needs of the market.” ●
“We see 2021 as the real pivot year after the big reboot.”
For some, 2020 offered the chance to launch a new social enterprise.
We see 2021 as the real pivot year after the big reboot. Partnerships and alliances formed last year are going to be delivering value in 2021.
“In our case, 2020 was a blessing. We could pause our full-time engagements and give a formal structure to this passion project,” says Praful Baweja, founder of 6 Degrees Diversity Counsel, a formal business growth network aimed at promoting diversity across ages, genders, origins, sexualities and abilities. He describes 2020 as a year of momentum.
“The online systems created by the Indian government helped complete registration tasks safely from our homes with a real-time, error-free process. In 2020, we took our diversity job fair, Vividh, online, and focused on technology enabling marginalised populations through our online recruitment platform Eqonomix. We see 2021 as the real pivot year after the big reboot. Partnerships and alliances formed last year are going to be delivering value in 2021."