Launching a startup in good times is hard enough. Now, imagine launching one amid a global crisis such as the COVID-19 pandemic. However, don’t let the current challenging times deter you from chasing your entrepreneurial dream. History shows us that several iconic corporations and entrepreneurs were born during major economic upheavals.
For example, Hewlett-Packard was founded in 1939, at the tail-end of the Great Depression and just before the Second World War broke out. Proctor & Gamble and General Electric were established during the Panic of 1837, a major financial crisis in the US that triggered a six-year depression in the country.
And there are several more examples that could inspire and motivate entrepreneurs to launch their dream startup— now.
Opportunity for entreprenurs in a time of crisis
Despite the altered landscape we are operating in, optimism reigns in the Indian startup ecosystem. According to a recent report, India produced eleven unicorns in 2020, and the number is expected to touch 100 by 2025.
Startups in the areas of edutech, fintech, insurtech and the payment industry sped up innovations, responding to the changing consumer behaviour triggered by the pandemic.
Further, the unprecedented adoption of AI by large corporations and MSMEs over the last year is likely to be a trend that will continue unabated in the post-COVID-19 world.
Numerous startups have caught onto the AI trend and are exploring the untapped opportunities in this space. AI will remain a critical tool that will fuel innovation and product-market fit to enhance the customer experience.
It was also a stellar year for the cloud-based SaaS industry, which promises to be the next big export from India, bigger than the software and IT services sectors. There is exuberance among investors for SaaS.
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A host of Indian SaaS startups, such as Zoho, Druva, Icertis, Postman and Freshworks, among others, capitalised on the growth of the SaaS industry and focused on how to become a competitive differentiator in the long run.
In other words, the pandemic has thrown open the floodgates to a plethora of opportunities for startups. Based on my observations, the best time to launch a startup is during opportunities like the current one, when multiple sectors are struggling to stay afloat.
Now is the opportune moment for new businesses to be established, offering customers better products at more competitive rates. As per recent reports, the gloom and doom of the pandemic have resulted in a surge in entrepreneurship across the globe.
For instance, in the US alone, business startups shot up from 3.5 million in 2019 to 4.4 million in 2020, witnessing a 24 per cent jump. However, a word of caution here.
While entrepreneurs need to seize new opportunities, they should act swiftly. These opportunities may not stay open for very long. Soon, the lucrative business prospects may dwindle.
The new reality of the funding ecosystem
The path to fueling a startup’s inorganic growth is through a robust funding mechanism. I urge startups to find the key pockets of opportunities; quickly test their product and get it to market; find the early customers and iteratively arrive at the right product-market fit. This is the mantra they should follow before turning their attention to raising funds.
It is pertinent to mention here that startup ecosystems have evolved to the point where they are no longer just incubators and accelerators. They are also a funding ecosystem that attracts multiple avenues of funding—venture capital, angel investments and crowdfunding.
One of the key trends that dominate today’s funding ecosystem is agility. VCs are more amenable to coming in early as they are scouting for diamonds in the rough. For example, Sequoia Capital offers an early-stage rapid scale-up program for startups in India and Southeast Asia called ‘Surge’ that seeks disruptive new ideas to create new categories and industries.
Venture Capital advisory firm Chiratae Ventures has launched a seed fund initiative called Chiratae Sonic that guarantees a 48-hour turnaround time on pitches for investment. Shortlisted early-stage founders will get investments less than or equal to US$500,000.
Also Read: Coping with consumer behaviour during the COVID-19 crisis
Likewise, the Telangana government is in the process of creating a ‘T-Fund,’ with the assurance of making the funding mechanism simpler for early-stage startups.
Another unique phenomenon witnessed in the current funding ecosystem is the strong VC interest in funding high-potential startups at the bottom of the pyramid. The rising number of entrepreneurs mushrooming in Tier-2 cities and beyond has diverted VC funding from larger metros to smaller towns.
In my view, this is a healthy trend that demonstrates India’s focus on nurturing a robust local entrepreneurial ecosystem that is a thriving subset of the larger ecosystem.
Undoubtedly, it is a great time to leverage the maturation of the funding ecosystem across India and build big enterprises for the global market. The US$10.14 billion funding that Indian startups attracted in 2020, despite the pandemic, is a testament to the faith foreign investors have in our entrepreneurs’ capabilities.
However, one of the drawbacks of the shifting funding landscape is the sharp divide that exists between the blue-eyed startups that raise millions of dollars of funding and those whose coffers have almost dried up.
Amid the pandemic, risk-averse VCs preferred betting on those startups in their portfolio that held the promise of coming out stronger on the other side.
The true heft of a startup ecosystem is not measured only by the number of unicorns that exist or the mammoth funding that top-of-the-line startups receive.
The more critical parameters would be the number of startups that are founded every year and the distinction between metro and non-metro business entities.
This approach will pave the way for a more egalitarian funding ecosystem that will aid in finding local solutions to longstanding societal problems.
Engage in the process of discovery
The keywords in a period of crisis are ‘opportunity’ and ‘agility’. Clearly, the established corporates lack the agility to move forward quickly and take advantage of the new opportunities that have emerged amid the pandemic.
Several opportunities left unaddressed by large corporates are seized by nimble entrepreneurs that move fast in challenging times.
I believe an innovation ecosystem can realise its true potential only if large corporates collaborate with startups to leverage the advantages offered by emerging opportunities.
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