Coronavirus Impact On Indian Startups & Small Businesses

Courtesied to COVID-19 scaremongering, the worst of news is about its impact on the economy and more precisely on startups and small businesses. Coronavirus business impact is major and has left the entire world in a state of shock and horror, but the ongoing calamity and the aftershocks will doom our startup ecosystem at worst.

The worst impact due to a national lockdown imposed for nearly a month has brought a number of the budding ventures that burn cash for existence, to their knees. Layoffs are in progress, a number of firms have taken to emergency-like situations and the worst is yet to be seen.

The startup ecosystem of India runs on a regular inflow of capital, and which makes for the revenue generated and the value attained in the minds of investors. Given the current scenario, when the customership has suddenly disappeared, these budding business houses have very little to reach out for help.

Angel investors who usually invest out of their pockets are reluctant on refuelling ongoing ventures or making fresh investments in the market. All of which can be traced back to the Coronavirus outbreak. The sudden disappearance of customership and the preventive measures that are inevitably the need of the hour as well, making any kind of operations tougher than ever.

Adding to the situational challenges, people who are unaware of the real-time situations are spreading speculations around the ground reality.

Small startups and business houses stand the most vulnerable to such times. It has been forecasted that 38 mn Indian employees are rendered jobless already and the number is expected to grow substantially in the upcoming months. Small scale F&B firms, retailers and budding entrepreneurs are facing a dilemmatic situation to let go of resourceful members or save the venture.

And this will not be contained to growth-stage business houses or MSMEs, there are rumours that the forest fire will be hard to contain. Major players in the travel industry have already started a downsizing process. Major credit agencies like Moody’s and such other brand names have listed a number of economies to be riskier prospects for investment. And maybe the entire world is gradually proceeding towards a global economic meltdown. Experts state that if it happens this once, it will be severe and worse than the 2008 economic recession. It is difficult to even estimate the Coronavirus business impact.

While there are a number of first-time entrepreneurs simply introduced to such an economic low, there are seasoned ones as well, who’ve seen such adverse times before, and their expertise can help the others make way for the future. And according to them, we should work upon alternatives if needed, while keeping disaster strategies prepared and keeping dug in until the weather clears out.

Need is the mother of all inventions, try bringing more efficiency in the ongoing projects. Make a transparent dialogue with your employees and keep a check on productivity. While you induce a new culture to the entirety of your operations, you can put in efficiency measures in place. And investing in technology to help and track your employees working remotely, is one of the things one should look up to.

Are we in the middle of a crisis?

Well, the impact is perceivable at every point in our economy’s graph.

The GDP of India is forecasted to take a massive hit in the upcoming months. We are on course to an all-time fall in the growth percentage.
With the latest COVID 19 relief packages in the picture, we are uncertain about the overall deficits that will surface ahead.
Investment groups, venture capital firms and other big names are restraining themselves to make any further investments.
People working in private enterprises have started to develop a sense of insecurity all across the globe and those who have not, are headed in that direction.
Amid speculations of an extended lockdown, even if it’s contained to some key states and areas, the gravest of concerns have been the survival of those lowest in the economic food chain, the smallest of ventures and the startup ecosystem.

How severe is Coronavirus business impact?

Coronavirus spread is a major concern for the entire human race. Countermeasures like the nationwide lockdown are necessary to save lives but are equally damaging for the newly conceived business houses.

Growth stage startups fall the lowest in the economic food chain and such a time is undeniably a concern worthy matter. Layoffs, salary cuts and other revenue hits are just the tip of the iceberg. The real damage is what we’ll witness in the aftermath.

Those who are to receive financial rounds of investment are expecting a delay in such payouts and the ones looking for new investments lay stranded in the middle. According to Rajan Anandan, MD, Sequoia Capital; tougher times ahead for startups in India. Late-stage investors are assessing the coronavirus impact and the decision for new investments has become a secondary concern for the time being.

Apart from the direct consequences, there are other factors including, a sudden retreat of foreign investments, uncertainty about the ongoing situation and much more.

Indian startup sector majorly depended on foreign investments and most of them from China. Foreign investments grew substantially in the previous year, from 2 Billion $ in 2018 to over 3 Billion in the last year.

And which was expected to grow subsequently, is vanishing in thin air and this is one of the biggest Coronavirus business impact.

Apart from China, a number of foreign investors have turned away from further investments for now. Investors from US, that also fill in for a huge need are already in stress positions and to expect an inflow of capital is the last thing there should be.

With no clear sight ahead, expected delays in further funding from overseas investors, the fate is uncertain for a number of growth-stage startups in India.

So how do we cope with the situation at hand? We need productive work from home culture, provisioning insights and a support mechanism forecasting better-yielding results way ahead, along other contingency plans to tackle the bumps ahead.

Among these, productive work from home schedule is the most important right now.

How to work from home productively?

Among the various schedules put into play for recovery, the most talked-about one right now is a productive work-from-home regime. Many growth or profit stage startups, corporates, MNCs are looking forward to cost-cutting logistics like working from home for their employees.

Apart from a minor lag in productivity, this prevailing work from home culture is getting highly sought after to make a substantial difference in the overall cost of operations by a number of enterprises.

There may be an initial gap in communications and networking remotely. But technology can help get rid of these bugs in operations. Apps nowadays can track productivity, advice improvements, facilitate all the communicational requirements, maintain a record of ongoing operations and continuously measure the graphs of productivity.

In a nutshell, these applications induce efficiency, ease and productivity to any organization’s remote working schedules.

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How should entrepreneurs deal with the crisis?

Just like all other hands on the deck, the startup industry is not only enduring the economic turbulence but is also contributing its bit to counter the pandemic situation.

Investments are being planned to cut down on expenses and to prioritize the safety of their employees even in the long run if it extends for 6 months or so. Along with a number of seasoned entrepreneurs and founder, Girish Menon of Swiggy came up with contactless delivery mechanism in these times to ensure employee and customer safety. And gradually, we all are synergising our efforts to make it endurable for the startup community.

While letting go of employees should be kept as a last resort, there are a number of ways to keep the boat afloat & minimize the coronavirus business impact.

1) Standby On New Acquisitions & Expansions

For the moment, growth-stage startups and MSMEs should keep the tap closed. New acquisitions or expansions if anywhere on the chart, should be kept on standby until the storm passes away. This will help your venture breathe on the cash reserves if required.

2) Cutting down on Accommodation & Logistics

A major chunk of expenditure is directed towards housing resources and logistics. Coming up with cost-efficient alternatives like relocating operations to coworking spaces is going to prove ideal.

3) Choose catalytical payouts instead of delays

Projects that entail delayed payouts should be kept away for the time being. While in such times, you must choose high yielding, highly efficient projects. These pay you well and well on time, reducing the need to procure resources when needed.

4) Put a stop on talent acquisition

Amid the virus outbreak, many of us would need to amend strategies and make changes to the existing models. It may require acquiring new talents as well, ideally. But until it’s gravely necessary, keep away from hiring new assets or liabilities for the future. Make way from the existing resources by channelling their expertise according to your plans.

5) Meanwhile, take up improvement projects

Optimising the operational flow is something you can do right now. Not only will it add more value for your brand among the existing clientele, but it would be a fruitful addition for the future. Making necessary changes when you’re idle on the revenue generation front is the key to sustaining through such times.

For a detailed guide, refer to this amazing piece by Kunal Bahl, Cofounder Snapdeal.

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Startups contribute to fight COVID-19

The Indian startup industry is doing every bit to help the community at large. Founders from the e-commerce industry, health & fintech firms and a number of sectors including real estate firms are doing every bit needed to help counter the COVID situation.

Taking the fight right to the virus, the startups of India are continuously developing technological support for the world, spreading awareness about the preventive measures, or simply providing help on the ground zero. Which has been taken up wholeheartedly by these small teams and businesses all across the nation, from food to shelter and entertainment, the startups have been helping all hands on deck amid this crisis.

Major eCommerce portals have started delivering groceries and essential commodities only to help ease up the system in place. OYO Rooms has turned many of its hotels into makeshift hospitals and isolation centres. Restaurants, F&B aggregators and other portals getting restaurant food to your home are all abidings of WHO specified safety precautions.

To help further, many of these firms have come up with relief packages of their own and contributed largely from their own pockets.

A new consortium of tech startups named “Startups VS COVID 19” has emerged as the one making the most impact. Started off with a strength of 60 entrepreneurs is a 600+ body in just a matter of days. They are actively helping the COVID vaccine research with tech support for telemedicine, building multistage testing procedures, scaling the manufacturing of test kits and the healthcare infrastructure. They also have further plans to counter the pandemic if it scales to a more devastating stage 3 in our nation.

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Most affected sectors by COVID-19 outbreak

Even with the coping mechanisms at play, there are a few sectors that may take a massive hit due to the COVID-19 outbreak. From direct consequences to channelled impacts these industries that have taken the worst hit by Coronavirus outbreak.

1) Travel Startups

With travel advisories and nationwide lockdown underway, travel startups are likely to endure the most.

With no existing leads, refunds to previously made bookings and uncertainty about the near future, there’s very less the travel startup sector can do to hold grounds amid coronavirus outbreak.

2) Real Estate Startups

Real estate is another sector that is experiencing Coronavirus business impact. Universally, the startup sector depends highly on on-field sales and peer to peer delivery of information. Amid the coronavirus scare, this mechanism has come to halt completely.

Potential buyers are refraining from any investment due to the current economic folio. Those who avail these services on a recurring basis are withdrawing continuity. Most of the real estate startups are facing hard times amid these tough times.

3) Marketing Startups

Marketing, which is often debated to be a less essential service is also under duress of economic slowdown. Ad Agencies and marketing individuals are left out of the essential requisites of any operation as they are secondary support mechanisms for any given firm.

Making them more prone to damage in the prevailing situation, the marketing industry is bracing up for a tougher time ahead.

Coronavirus business impact is turning out to be devastating for the entire world. Coping mechanisms are put into play, but an impact is inevitable, to say the least. We are heading into rough waters, but with togetherness and support, we shall sail through safely. So let’s pledge to make things easier for the entire world around and let’s come out of this calamity together.

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