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Covid impact: 40% of Indian start-ups hit, but recovery is strong, says report

Our Bureau Bengaluru | Updated on October 14, 2020 Published on October 14, 2020

India is on track to have 100 unicorns by 2025, says report

The calendar year 2020 began with an Indian ecosystem of over 38,000 start-ups, growing rapidly on the back of a spectacular 2019. However, Covid-19 jolted the start-up ecosystem across multiple dimensions and the impact was severe during the lockdown period from March to June.

There was a dip of 50 per cent in overall funding during the lockdown versus pre-Covid levels; around 40 per cent start-ups were negatively impacted, and 15 per cent of the Indian startups were forced to discontinue operations due to Covid-19. These were some of the findings of a report by TiE Delhi-NCR and Zinnov titled ‘Covid-19 and the Antifragility of Indian Start-up Ecosystem’, released on Wednesday.

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However, as the economy opened, the pace of recovery in demand and in investor sentiment has been faster than expected. The shift to digital consumption has provided the necessary tailwind to sectors such as education, healthcare, and commerce, while several others sectors like travel, hospitality and mobility are now on a recovery path. For instance, 75 per cent start-ups are gradually recovering post lockdown. Around 30 per cent have pivoted to newer markets for alternative revenue streams, while more than 55 per cent are focusing on profitability and reducing cash burn, the report said.

Positive signs

Deal activity in terms of total investments and the number of unique funded start-ups has recovered to pre-Covid levels during the September quarter. Interestingly, four Indian start-ups have become unicorns (Nykaa, Postman, Unacademy, Razorpay) and India is on track to have eight unicorns in 2020, almost the same as in 2019. In Q3 of CY 2020, the Indian start-up ecosystem showed positive signs of recovery with funding reverting to 98 per cent of Q1 levels, investor sentiments becoming positive, ticket sizes increasing, number of start-ups raising their first investment round also reverting to Q1 levels.

 

Additionally, the start-up ecosystem is expected to have 7-7.5 lakh direct jobs and 26-28 lakh indirect jobs by the end of 2020.

Rajan Anandan, President, TiE Delhi-NCR, said, “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 start-ups have reduced burn and improved their unit economics very rapidly.”

“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. India is on a path to have 100 unicorns by 2025,” he added.

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Published on October 14, 2020
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