India is on a path to have 100 unicorns by 2025, despite the impact that the covid-19 pandemic has had on the Indian start-up ecosystem, according to a report titled ‘Covid-19 and the Antifragility of Indian Startup Ecosystem’.
To put it in perspective, despite being jolted by the pandemic, four Indian startups – Postman, Nykaa, Unacademy and Razorpay became unicorns amid covid-19 and the country 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 not-for-profit organization that promotes entrepreneurship in partnership with Zinnov, global management and strategy consulting firm revealed that there was a dip in overall funding by 50% during the lockdown as compared to pre-covid levels. As a consequence, about 40% of the start-ups were negatively impacted, and 15% were forced to discontinue operations.
The world’s third largest start-up ecosystem was jolted by the pandemic across multiple dimensions and the impact was severe during the lockdown period from March to June 2020. However, as the economy opened, the pace of recovery – both in demand and in investor sentiment – has been faster than expected.
“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,” said Rajan Anandan, President, TiE Delhi-NCR.
According to the research, shift to digital consumption has provided the necessary tailwind to sectors such as education, healthcare, and commerce; while several sectors like travel, hospitality, and mobility, that were negatively impacted, are now on a recovery path. For instance, 75% start-ups are gradually, but steadily, recovering post lockdown. Around 30% of startups have pivoted to newer markets for alternative revenue streams, while more than 55% of startups are focusing on profitability and reducing cash burn.
Further, deal activity – both in terms of total investments and the number of unique funded startups – has recovered to pre-covid levels during the quarter ended in September 2020. Additionally, the startup ecosystem is expected to have 7-7.5 Lakhs direct jobs and 26-28 Lakhs indirect jobs in total, by the end of 2020, further cementing its recovery.
“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,” added Anandan.
The brave response of entrepreneurs and the ecosystem as a whole, to the uncertainty brought on by the pandemic, by adopting new business models in line with the evolving customer needs and market conditions exemplifies the antifragility of the ecosystem.
The report illustrates the range of impact on the various sectors and elaborates on the steps taken by entrepreneurs to reinvent their business models to minimize the impact of covid-19. Factors that reflect the ecosystem’s resurrection include pickup in M&A activity and seed as well as late-stage funding. In Q3, the Indian startup ecosystem showed positive signs of recovery – funding reverting to 98% of Q1 levels, investor sentiments becoming positive, ticket sizes increasing, number of startups raising their first investment round also reverting to Q1 levels – ensuring that the startup ecosystem bounced back, with an expectation of becoming healthier and more vibrant in the future.
“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,” said Pari Natarajan, CEO, Zinnov.
This article was first published on livemint.com