Indian startups get creative as coronavirus crisis fuels funding crunch


BENGALURU: Samik Sarkar was managing to eke a revenue out of his on-line attire retailer earlier than the coronavirus crisis hit India, forcing the 36-year outdated to reinvent his enterprise in a single day. “I started selling masks because that’s all I could sell,” Sarkar stated. “I have salaries to pay.”
The fast international financial slowdown, India’s coronavirus lockdown of 1.three billion individuals and an exodus of enterprise capital are testing a start-up group that has shortly change into one of many world’s largest, elevating a report $14.9 billion final 12 months.

The success of Indian e-tailer Flipkart, offered for $16 billion to Walmart in 2018, helped attract billions of {dollars} in funding from international enterprise capital corporations, whereas U.S. and Chinese tech giants stalked promising prospects.

But in only a few months a lot of that money has vanished, with enterprise capital and personal fairness funding in India anticipated to fall by 45%-60% this 12 months, EY estimates.

A bunch of the highest enterprise corporations, together with U.S. teams Sequoia and Accel, warned start-ups this month that will probably be “very difficult” to lift financing anytime quickly.

Five enterprise capitalists advised Reuters that only some of the very best corporations from their current portfolios would be capable to get additional funding, whereas most new ventures will doubtless be locked out for the foreseeable future.

This fast turnaround has left scores of Indian startups which had been plotting enlargement and fundraising contemplating something and every thing to maintain themselves from going below.

Data from Tracxn, which displays startup investments and financials, exhibits there have been 1,406 funded start-ups in India in 2019, in contrast with 351 in 2008.

“When you look at pre-COVID business models, half of them will not survive post-COVID,” Sudhir Sethi, founder and chairman of Bengaluru-based enterprise capital agency Chiratae Ventures, stated.

The funding freeze has been compounded by India’s transfer in April to step up scrutiny of investments from abroad, a transfer seen by some analysts as a thinly disguised deterrent to takeovers by Chinese corporations, which have been massive traders in India’s tech trade.

And with SoftBank, one other main funder of Indian startups, dealing with setbacks elsewhere there’s little reduction anticipated from the Japanese know-how backer. This leaves traders and start-ups with few options however to give attention to pursuing profitability and lowering money burn, Sid Talwar, associate at Mumbai-based Lightbox Ventures, stated.

“For Indian companies, if SoftBank does not write big checks and Chinese pools of capital slow down, it will further accelerate that thinking,” Talwar advised Reuters.

‘BIG SHOCK’

Startup founders contacted by Reuters stated that they had sufficient money for a few months on the most.

“We had big expansion plans just before this hit,” stated Sujata Biswas, who co-founded Mumbai-based on-line clothes model Suta along with her sister Taniya. “All of that has stopped … It was a big shock,” she added.

Suta, which noticed gross sales triple for 3 years earlier than India’s lockdown stopped all enterprise, can be unable to remain afloat past a month and a half with no money infusion, Biswas stated.

Cure.match, a Bengaluru-based health agency which needed to shut its gyms and well being clinics round India, slashed salaries and laid off about 800 individuals in latest weeks. It is now making an attempt to get by by providing digital yoga courses and home-delivering groceries as Indians keep indoors throughout the lockdown.

BookMyShow, a web-based ticket vendor, is selling free-to-watch Instagram Live performances in an effort to maintain its customers engaged, whereas restaurant aggregator and meals supply agency Zomato is focusing on a push into alcohol supply.

Others such as meal supply agency Swiggy and resort operators Oyo and Treebo have shed workers, lower salaries, and put staff on furlough, sources on the corporations advised Reuters.

Apparel retailer Sarkar stated he anticipated his on-line retailer, Rustorange, to see a 50% hunch in demand from pre-virus ranges even after the lockdown is lifted.

With 35-40 full-time employees and about 70 part-time staff, he solely has sufficient money for “a month or two”. To survive, Sarkar is drawing on his expertise of a 2016 funding crunch, which introduced down his earlier agency. “We are now trying to think of ways that can be appealing in the new normal,” Sarkar stated. “We are thinking of developing masks as a fashion accessory.”

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