COVID-19 Startup Impact Report 2020: Threats Opportunities ... · revenue decline. Further, the likes of Flipkart, Zomato, Swiggy, BigBasket, Grofers, Snapdeal, Paytm Mall and others

COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy 1

Con

tent

s

Con

tent

s

01Scope Of The Report

02Executive Summary

03Introduction

04Global Economic Impact Of The Pandemic

- Impact On Production

- Impact On Supply Chain

- Impact On Consumer Demand & Purchasing Power

05Impact On Employment In India

- Sector-wise Impact

- Startups Take Unenviable Lead In Layoffs

09Indian Startup Funding Activity: Q1, 2020

- Funding Trends

- Sector Wise Analysis

- Stage Wise Analysis

- Mergers & Acquisitions

- Top Investors

- Future Perspective

10The U Turn:- Creative Destruction And

The Advent Of New Age Economy

07The Need For Intervention

06Investor Uncertainty Indicators

- GMV Of Indian Startups

- Generating Employment

- Aggregate Expenditure Of Indian Startups

08Significance Of Startups In The Indian Economy

Con

tent

s

- Increased Utility Of Apps: Bridging The Digital Divide

- 3D-Printing And The Rise Of Rapid Manufacturing

- Business Sustainability Over Valuation

- Attention Economy Set For The Golden Age

- Rise Of Virtual Events And Webinars

- Adoption Of Mandatory Sick Leave Policy

- Hyperlocal Delivery Application

- Video Conferencing Applications

- Remote Workplace Applications

13Emerging Trends In The India Startup Ecosystem

14The Worst Impacted Segments

15Methodology &Glossary

16Bibliography12

11Sectors Witnessing A Boost

- Media And Entertainment: OTT & Gaming Lead The Way

- Digital Media: The New Mainstream

- Video Conferencing: Businesses Run On Zoom

- Enterprise Tech And SaaS: The Big Boom

- Supply Chain & Logistics: Clearing The Hurdles

- Personal Hygiene: A Need Like Never Before

- Edtech: Online Learning Comes To The Rescue

- Hyperlocal And Ecommerce: Essentials In Focus

- Logistics And Supply Chain

- Healthtech

Customer Perception Analysis: India


Scope Of The Report

01Sc

op

e O

f T

Exec

utiv

e

The COVID-19 pandemic has infected more than 2.3 Mn people in over 200+ countries till April

19, 2020. Stock markets have continued to crash globally, and businesses are running on limited

resources and supplies amid widespread fear and panic. Almost every sector is dealing with the

burden of the crisis, with tech giants cancelling plans and forced to suspend operations in many

geographies

.

While people everywhere are in a state of panic, working from home has become a new norm

for businesses around the world, except those on the frontlines and those participating in the

essentials supply chain. While services and delivery-focussed B2C companies have seen increased

demand, they are yet to fill the gaps in their workforce. In India, the government is working closely

to monitor the situation, however, there are still rising fears of cases being spread via delivery of

these services, as highlighted by the incident surrounding a pizza chain delivery agent in Delhi who

fulfilled an order for Zomato and later tested positive.

As the world awaits a vaccine for the deadly virus, the global economy is bracing for an impact

far more severe than any recent epidemic such as SARS and MERS, with the United States, Italy,

France and Iran being the worst hit countries.

This report, an extension to DataLabs By Inc42’s previously published report “Business In The

Times Of Coronavirus: India And The World”, seeks to provide a perspective on the impact of this

pandemic on different industries, the new opportunities which will be created, and how existing

industries will pivot to stay relevant in the post COVID-19 world.

5

Executive Summary

02Ex

ecut

ive

$320 BnThe total impact of the 40-day lockdown on India’s GDP

17 8.64% 80%

31%

60%38% 73% 14.2x

$4.1 Bn $13.7 Bn6-12 Months

G20 countries have witnessed a contraction in their manufacturing purchasing manager index

The decrease in total passenger vehicle production of India in February 2020 compared to January

Decrease in mobility for retail spaces such as restaurants, cafes, shopping centres etc.

VC-funded Indian startups that have undertaken layoffs

Growth in BYJU’S downloads after it announced free courses and learning modules

The growth in mobile game downloads globally

The surge in the total session time per user for Netflix in India

The difference between the revenue loss inflicted by the 40-day lockdown and the government’s stimulus package

Secured by Indian startups across 208 deals in Q1 2020

The expense incurred by top 50 Indian startups in FY’19

Runway of cash reserves for the majority of Indian startups

6

Introduction03The COVID-19 pandemic is the greatest global humanitarian crisis the world has faced since

World War II. Nearly every economy is suffering and employees everywhere have either lost their

jobs or are having to take a pay cut. Consumer spending as a result is entirely on the essentials,

with all ancillary or leisure spending out of reach.

India moved relatively quickly after the number of cases started rising and implemented a

nationwide lockdown (which was extended till May 03, after the initial 21-day phase) with the

goal of flattening the curve of infections. A rapid action was needed given the population

density and the country’s weak public healthcare infrastructure.

The daily GDP of India is estimated to be approximately $8 Bn and a 21-day lockdown is

poised to cost the Indian economy a whopping $167 Bn. Given the fact the lockdown has been

extended further (with levy on certain sectors), the pandemic is expected to hit Indian economy

with about $320 Bn in terms of daily GDP loss after 40 days of lockdown.

Beyond the economy, tech startups have suffered big blows too. The impact has been severe

on the travel and mobility sector with unicorns such as OYO, Ola, MakeMyTrip seeing massive

revenue decline. Further, the likes of Flipkart, Zomato, Swiggy, BigBasket, Grofers, Snapdeal,

Paytm Mall and others have had to pivot a lot of their operations, navigate supply chain hurdles

even as they geared up to deliver groceries.

The MSME sector, often called the backbone of the Indian economy, has had to shut small-

scale factories, is working with minimal workforce and if the NBFC crisis of 2018-19 was not bad

enough, the COVID-19 pandemic has decimated the MSME revenue even more. Intr

od

uctio

n


Possible Scenarios For The Indian Economy In The Post COVID-19 WorldIndia’s GDP will suffer worse if lockdown is extended to Q2 FY 2021

Da

ily %

Cha

nge

Similar to the price the total volume was also at its 2 months high— 230.7 Mn, on March 24th

Real India GDP Approximate IndiaGDP growth, FY2021over FY2020,%

70

80

90

1101 to 2

-2 to -3

-8 to -10

100Scenario 1

Scenario 1 Scenario 2 Scenario 3

Scenario 2

Scenario 3

Q4FY2020

Q1FY2021

Q2FY2021

Q3FY2021

Q4FY2021

Nationwide lockdown lifted on Apr 15, 2020 (end of 21-day deadline); prior relaxation for select areas(eg,logistics)

Back to work in “save lives and livelihood” mode, with strong protection protocols

support to households, corporation, and banking system with fiscal and mone-tary stimuli (some measures already announced)

Lockdown continues until mid-May 2020 moderate relaxation after Apr 15, 2020 (end of the 21-day deadline) restarting supply chains and consumption take 3-4 months

Stabilization and stimulus package, broader than in scenario 1

Lockdown as in scenario 2, with additional 2-3 week lockdowns in Q2 and Q4 FY 2021 because of virus resur-gence

Low labor availability because of limited reverse migration

Stabilization and stimulus package even broader than in scenario 2

Source: McKinsey

9

Global Economic Impact Of The Pandemic

04

Glo

ba

l Ecn

om

ic


Production Impact: Purchasing Managers Display Negative Sentiment

Source: Institute Of Supply Management, DataLabs Analysis

Italy 48.7

51.9

49.8

51.8

49.2

48.7

52.4

51.7

52.3

47.8

50

54.5

48

50.7

48.2

44.3

44.3

40.3

40.3

45.3

43.2

46.1

44.5

44.2

48.1

47.8

48.4

44.2

46.9

51.8

45.4

48.5

47.5

48.1

53.7

50.1

-8.4

-6.6

-6.6

-5.7

-4.7

-4.5

-4.3

-3.9

-3.9

-3.6

-3.1

-2.7

-2.6

-2.2

-0.7

3.8

9.4

9.8

Brazil

Euro Area

Germany

France

Mexico

Turkey

Russia

Australia

Indonesia

Japan

South Korea

United States

Canada

India

United Kingdom

South Africa

China

Countries PMI Index (February 2020)

PMI Index(March 2020) Difference

18

Impact on Employment In India

05The uncertainty fueled by the outbreak of Covid-19 in India forced the several companies to

take extreme measures for cash conservation. This change in the business dynamics fuelled

layoffs, salary cuts and freeze in hiring across all sectors.

The Indian startups which are heavily dependent on VC funding were the worst affected,

according to a survey by Praxis Global Alliance which covered 50 Indian startup CEOs from

across the country. It concluded that 37% of the surveyed companies planned to cut the senior

management salary by 25 to 50%Imp

act

on

E


Source: Compiled by Inc42 Media

Startups LayoffsPay Cuts

Senior Management Founders

No

No

Yes (6-7%)

No

No

No

No

No

No

No

Yes (30%)

Yes (20%)

Yes (10%)

Yes (10%)

No

No

Yes (30%)

No

No

Yes (10%)

Yes (30%)

Yes (50%)

No

No

Yes (40%)

Yes

No

Yes

No

No

No

No

No

Yes

Yes

Yes

-

-

-

Yes

Yes

Yes

Yes

Yes

Yes

Yes

-

Yes

Yes

Yes

Yes

No

Yes

No

Yes

Yes

No

No

Yes

Yes

Yes

-

Yes

-

Yes

Yes

-

Yes

Yes

Yes

Yes

-

Yes

Yes

Yes

Employees

No

No

Yes

No

No

No

No

No

Yes

Yes

No

-

-

-

Yes

Yes

Yes

Yes

Yes

No

Yes

-

Yes

Yes

Yes

24

Investor Uncertainty Indicators

06

Inve

sto

r Un

27

The Need For Intervention

07

The COVID-19 pandemic started off slow in India but eventually, an exponential growth has

been seen in the number of confirmed cases. In order to curb the spread of infection among

the masses, a lockdown was announced by the Indian government from March 25, 2020, which

indeed has had a devastating impact on the business operations in the country. The daily

GDP of India is an estimated $8 Bn, therefore the total cost to the GDP with a 21-day lockdown

is approximately — $167 Bn.The

Nee

d F

31

Significance Of Startups In The Indian Economy

08

In the context of India and the world, the startups have been at the forefront of driving

tech adoption in the country. There is a very high degree of correlation between the value

proposition of technology in consumers mind and the development of the startup ecosystem

in any country around the world.

The Indian startup ecosystem has grown immensely as an economic base over the past five

years. As per DataLabs by Inc42 the total number of startups in the country has grown from

29K in 2014 to 49K in 2018. In pursuant to the growing numbers of startups, the venture capital

inflow in the ecosystem has also grown significantly — 2.4x growth in the total funding of Indian

startups from $5.3 Bn (2014) to $12.7 Bn (2019). Significanc

e

Indian Startup Funding Activity: Q1, 2020

09

Significanc

e


Top Investors

Dea

l Pa

rtic

ipa

tion

A whopping 79% of the total acquisitions in Q1 2020 featured startups as buyers

Startups Acquire Startups In Q1 2020

NoBroker1

Sachin Bansal1

Digital Vidya1

Easypolicy1

Freshworks1

Goscale1

LetsTransport1

MyTVS1

NestAway1

ShareChat1

ShopUp1

Shriram Automail1

ClearTax1

Square Yard1

Urban Company1

Titan Company Ltd1

Zomato1

OYO1

PreLoved Devices1

In recent years, we have seen a shift in the culture of M&As in the India startup ecosystem. From a time when big corporations used to acquire startups to a time now when bigger startups are acquiring the smaller ones. Primarily the startups acquire other startups for the following reasons:

Expanding their product offerings

Killing the competitions

Expansion of the user base

Acquisition of unique techonlogy

Sequoia Capital

Accel Partners

Jain International Trade Organisation (JITO) Angel Network

AngelList

Venture Catalysts

Chiratae Ventures

LetsVenture

Omidyar Network

Blume Ventures

Trifecta Capital

19

14

8

7

6

6

5

5

5

5

4343

The U-Turn: Creative Destruction And Advent Of New Age Economy

10

Schumpeter’s gale also known as the gale of creative destruction argues that a process

of “industrial mutation that incessantly revolutionises the economic structure from within,

incessantly destroying the old one, incessantly creating a new one.”

In today’s context it means that age-old business sectors will give way to new-age

tech businesses to flourish. Covid-19 has fueled a change in consumer behaviour at an

unprecedented scale — things that take decades have happened in a matter of weeks and

this has catalysed mainstream growth in India for tech sectors like ecommerce, hyperlocal

deliveries, supply chain and logistics, digital entertainment, content and media, and enterprise

tech. The

U T

urn:

4545

Sectors Witnessing A Boost

11

Sect

ors

Wit

6464

Customer Perception Analysis: India

12

Cus

tom

er P

The customer perception analysis is done analysing the public reviews from users across various social media platforms and discussion forums. The data used in this study was curated by our third-party data partner Clootrack.

7070

Emerging Trends In The India Startup Ecosystem

13

Emer

gin

g T

7373

The Worst Impacted Segments

14

The

Wo

rst

I


Travel and Tourism

Automobile & Electric Vehicles

The COVID-19 pandemic could cut 50 Mn jobs worldwide in the travel and tourism industry.

The number of scheduled flights is down 12% year-over-year compared to March 2019.

The tourism industry currently accounts for 10% of global GDP

More reliance on robots and automation for customer interactions

China is a major exporter of automobile parts in India.

18% of Indian automobile components are exported from China.

30% of tyres are imported from China

China exported $773 million worth of lithium-ion batteries to India in FY’19

A decrease in GVA from the tourism sector in the country. Clubbed with major layoffs and salary cuts of the employees.

OYO said it expects 60% lower revenues in the months to come

A possible shortage of auto components in the coming quarters, along with a decline in production of BS VI compliant vehicles

The Worst Impacted Sectors In India

Sectors Impact Cost

Shared Living & Coworking

Retail & Ecommerce

As work from home becomes the new modus operandi, coworking spaces have become isolated.

Higher investments expected in hygiene and cleanliness technology.

More reliance on robots and automation for providing service

125-plus malls along with 100 attached multiplexes affected by Covid-19 outbreak in India.

Indian ecommerce lost approximately $400 Mn in a week due to COVID-19.

As per Apparel Export Promotion Council (AEPC) at least $2 Bn lost in revenue due to transport embargoes

Shutdowns, layoffs and salary cuts, asset depreciation, revenue loss

Closing down of stores, layoffs and salary cuts

7676

Methodology & Glossary

15

The report has undertaken data points from both primary and secondary research. The

aggregate revenue is calculated by the sum of total revenue of top 50 Indian startups which

made more than 60% of the total venture capital market cap in India between the interval of

2014 to 2019.

Preference to total revenue over revenue from operations is given to minimise the impact

of startups not included in the sample set. The per-capita spending of the government for

COVID-19 relief is calculated on the per-capita value of the stimulus package in relation to

the population.

COVID-19: Coronavirus

$X Bn: Billion in USD

$X Mn: Million in USD

Seed Stage: <Pre series A

Growth Stage: Series A and B

Late Stage: Series C and above

VC: Venture Capital

Angels: Angel Investors

PMI: Purchasing Manager IndexMet

hod

olo

Nomenclature:

Bib

liog

rap

h

77

Nomenclature:

77

Bibliography16Big.Jobs

Institute of Supply Management

Stanford University

John Hopkins University

Interaction with stakeholders

Ministry of Statistics and Programme Implementation

Ministry of Corporate Affairs

https://www.weforum.org/projects/3d-printing-covid-19-rapid-response-initiative

https://inc42.com/buzz/vedantu-bags-12-5-mn-funding-from-legend-capital-omidyar-

to-ride-the-edtech-boom/

https://books.google.co.in/books?id=6eM6YrMj46sC&redir_esc=y

https://www.thehindubusinessline.com/economy/supply-chain-shock-a-negative-for-

indian-auto-component-industry-icra/article31247101.ece

https://www.indiatoday.in/india/story/coronavirus-lockdown-hundreds-stranded-truck-

drivers-face-hunger-bribery-1661077-2020-03-29Bib

liog

rap

h

COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy 78COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy 78

Inc42 is a leading Indian media and information platform, known for its end-to-end coverage of the Indian startup ecosystem. We work with the mission to empower, connect & grow the Indian Startup Ecosystem by providing a deep understanding of the startup economy through data-backed news and analysis. Inc42 is the authoritative voice of the Indian Startup Ecosystem and it has brought to light the amazing stories of thousands of startups, entrepreneurs, technological innovations, businesses and many other constituents of the startup ecosystem. Starting 5 years ago, Inc42 has now become the gateway to the Indian startup ecosystem, having published more than 20,000 stories and touching the lives of more than 20 Million people in India every month.

The research wing of Inc42 Media, DataLabs specialises in producing comprehensive datadriven and insightful reports about the ballooning Indian startup economy. Since its launch, DataLabs has produced over 35+ reports — covering diverse sectors such as Blockchain, Agritech, Foodtech along with regular coverage of investments and the overall health of the Indian startup ecosystem.

DataLabs reports are aimed at bridging the information & data gap about the Indian startup economy. In the last few years, DataLabs has produced comprehensive & insightful reports to help readers make more informed decisions at work, in investments, and more. It is responsible for producing detailed reports covering the diverse industries of the Indian startup ecosystem spread across 29 states and 7 Union Territories of India.

Sandeep SinghNikhil SubramaniamNaga Jayadeep Akula

Sabith

Inc42 Media59/16, 4th Floor, Jujhar Tower,RD Marg, KalkajiNew Delhi,Delhi 110019

w w w. i n c 4 2 . c o m

www.datalabs.inc42.com EDITED &COMPILED BY

DESIGN & INFORGRAPHICS

ADDRESS

Credits

Contact: [email protected]


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COVID-19 Startup Impact Report 2020: Threats Opportunities ... · revenue decline. Further, the likes of Flipkart, Zomato, Swiggy, BigBasket, Grofers, Snapdeal, Paytm Mall and others