Welcome to the COVID Economy | 2019

The Descent: Pandemic, Paychecks, and Pink Slips!

In the streets that were once bustling with the hustle of everyday life, a haunting silence descended with the coming of COVID-19. Shops stood closed with their shutters down, offices empty with only the essentials sector working in this environment; it felt as if life had come to a standstill with the pandemic changing everything that was once considered ‘normal.’ A sharp decline in sales was seen, coupled with travel restrictions, social distancing, and loss of revenue, making it difficult for businesses to survive in this unprecedented period.

From downsizing and team reductions to shutting down or halting their operations, start-ups found themselves navigating through uncharted waters, struggling to make tough decisions for their survival. According to a NASSCOM survey, approximately 70% of the startups faced an existential crisis.

With 43% of start-ups forced to cut salaries by up to 40% between April and June 2020 and 15% on the brink of discontinuation, the fall in revenues to 90% worsened the entrepreneurial landscape.

Consequently, as a domino effect, the ranking of the Indian start-up ecosystem, once soaring at the 17th in 2019, fell to the 23rd in 2020. This black swan event caused a transformation in the Indian economy at large and fueled diversification and innovation in the race for survival.

How did we recover?

Necessity being the mother of inventions, the staggering challenges brought new avenues of creativity and adaptability that would change the ecosystem for years. The new normal became a catalyst for change and inspired the entrepreneurial spirit among the people. When physical restrictions became a daunting challenge, the industry became a work-from-home environment. By going digital, startups revolutionised the ecosystem. This cut down on infrastructural costs and promoted digital literacy among people. 

With all essential transactions happening online, startups can now cater to a broader range of audiences without the hurdles they used to face in the offline setup. The government also aided the startups through schemes like Atmanirbhar Bharat and brought policies to bring the economy back to normal. The OECD reported that governments worldwide implemented wage subsidies for small businesses and direct financial support to SMEs to encourage them to retain employees. Gradually, the startups adapted, and Indian start-ups recorded total funding of $11.5 billion, which was just 10% lower than that in 2019. Moreover, they showed a 14% higher number of deals in 2020 than in 2019.

How did innovation shine in adversity?

When the crisis loomed, certain startups pivoted and seized the opportunities.  Swiggy, which started as a food delivery company, ced a potential threat from the pandemic. The company quickly capitalised on the opportunity to expand its delivery services to include groceries and other essentials. This pivot helped Swiggy maintain relevance and provided a lifeline to local stores and needy customers during lockdowns.

Zoom became a household name almost overnight as the need for video conferencing soared. The company expanded its services to cater to a wide range of users, from schools to corporations, ensuring connectivity in a socially distanced world.

On the other hand, Uber had to face a significant drop in the number of rides due to the lockdowns. Seeing the changed circumstances, Uber launched Uber Eats, a food delivery segment, and found grocery delivery services in some areas. Similarly, apps like BlinkIt also received a boost in this period.

A colossal growth was seen in sectors like Healthcare and EdTech. Healthcare saw the development of telemedicine, personalised healthcare solutions, and better accessibility of services. Medicine delivery apps flourished during this period.

In the Edtech sector, online learning services got an impetus. Apps like Google Classroom and Google Meet have now reached almost every household. Businesses like Vedantu and Unacademy launched distance learning courses with interactive and engaging content. This not only transformed the traditional classroom setup but also helped educators to upskill and keep up with the changing technology.

So, what are the takeaways from the pandemic?

The COVID-19 pandemic also brought out the best in the Indian startup ecosystem, as many stakeholders joined hands to launch various initiatives to support the affected sectors and communities.

Venture capital firm Sequoia introduced a $1.5 million grant programme for early-stage start-ups affected by the crisis in India and Southeast Asia. The programme provided mentorship and access to Sequoia's network, with an aggregate grant of $150,000 per business.

Similarly, several initiatives were introduced by the government under its flagship programme, Startup India, to assist businesses in overcoming obstacles and seizing opportunities presented by the pandemic. These included a business continuity toolkit with pro-bono goods and services from partners, a startup hub offering advice and support, a dedicated COVID-19 resource zone on the Startup India webpage, and a race to find creative COVID-19 solutions.

Moreover, nearly 600 entrepreneurs and investors across the technology industry joined with activists and policymakers for the "Startups Vs COVID-19" initiative. Together, they launched several initiatives to help during the crisis, such as contact tracing apps, symptom reporting apps, COVID-19 literacy campaigns, and relief funds.

The pandemic also catalysed new and existing startups to grow as the demand for digital solutions and innovation increased. According to reports, India added 12 new unicorns in 2020 despite the economic slowdown. The startup funding recovered in the year’s second half, reaching $11.5 billion by December.

The revival of entrepreneurial activity in India can be linked to the entrepreneurs' adaptability, innovation, and resilience in seizing the opportunities that came with the new normal. Many others followed their entrepreneurial dreams after using the lockdown to reflect on their goals and passions. The halt caused by the pandemic encouraged a cultural shift, challenging traditional notions of job security and stability. With conventional job models disrupted, many started thinking about other options, especially in entrepreneurship.

Ultimately, entrepreneurship is all about risk, creativity, and opportunities, and this was something we learned through the pandemic. The Indian startup ecosystem showed that it could rise to the challenge, emerge stronger from the crisis and convert every aapda (disaster) into an avsar (opportunity).