INDIAN TECH START-UPS – On the Road to Recovery
Blog: NASSCOM Official Blog
COVID-19 has been the biggest disruption across all sectors and the impact on the technology start-up sector seemed to point to a doomsday scenario.
NASSCOM conducted its first Start-up Pulse Survey in April – May 2020 that presented a very grim picture. Majority of the early stage start-ups surveyed responded that their business was massively impacted and almost 2/3rd of start-ups had cash availability of less than 3 months. The lockdown impacted all sectors of the start-up ecosystem – ecommerce, logistics, Fintech etc. The two sectors that saw growth opportunities were Edtech and Healthtech. The findings of the first survey also pointed to the resilience of the start-up sector and pointed out that majority of start-ups were looking to either pivot their offerings, move to adjacent verticals or reimagine their operating and business model.
6 months into the COVID crisis, NASSCOM revisited this survey with tech start-ups to understand what the current perspectives are, what has changed and what the next 6 months look like. The findings surprised us. While there is still concern and uncertainty on the pandemic and its impact, the Indian tech start-up sector is well on the road to recovery. What gives us hope is the following analysis:
- Revenue acceleration and funding has improved the cash availability with start-ups
- 43% start-ups have runway for more than 6 months, compared to 8% in the earlier survey
- 27% start-ups have runway for less than 3 months, compared to 70% in the earlier survey
COVID-19 has accelerated digital adoption and tech start-ups are able to leverage this opportunity with enterprise and SMB clients for product adoption. Greater focus on the shift to online has also created new business opportunities.
- Enhanced interest from VCs and funding agencies to invest in early-mid stage start-ups
- Almost 25% of the surveyed start-ups have been able to raise funds or find prospective investors as compared to 7% in the earlier survey
- Sectors like Edtech, Healthtech, SaaS, SMB continue to attract investor interest
Atmanirbhar Bharat, digitalisation of India, greater focus on sustainable business models is attracting VC interest for Indian tech start-ups
- Jobs with the right skills continue to be in demand
- Hiring freeze at tech start-ups dropped by 20%. The current survey shows than 44% tech start-ups still have a hiring freeze compared to 64% in the earlier survey
- Digital skills – data, AI, product management, cloud architects continue to be in high demand across the tech start-up ecosystem. E-commerce retailers also stepped up hiring during the festival season to meet the online demand surge.
While start-ups continue to be cautious, they are increasingly looking at hiring talent with the right competencies.
- Tech Start-ups are building sustainable operating models and demonstrating agility and resilience
- 62% of start-ups continue to focus on operational cost optimisation and bringing down customer acquisition cost.
- 72% start-ups are enhancing their product offerings and investing in deep tech solutions that enable automation and analytics for their clients
- 60-70% of start-ups are relooking at their business models – expanding to new verticals, building partnerships or enhancing existing solutions
COVID-19 has brought to the fore the importance of not chasing revenue at any cost. There is likely to be a more judicious mix of revenue and operational efficiency going forward
- Tech start-ups are cautiously optimistic but believe they can reach the Pre-COVID levels in the next 6 months
- Almost 50% of tech start-ups expect to reach Pre-COVID revenue levels in the next 6 months, though Pre-COVID funding levels may take longer
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