India’s startup sector is experiencing tough times due to the Covid-19 pandemic, which is seen disrupting the progress and future potential of this highly promising sector. “I expect the business landscape to be volatile for the upcoming 2-3 months, post which the situation will gradually improve,” says Anjali Bansal, the founder of Avaana Capital, a platform that invests in the scaling up of growth stage businesses. “As investors will become more cautious, deals will take longer to close. But, exceptional entrepreneurs should not face a challenge,” she tells Sudhir Chowdhary in an interaction. Excerpts:
How is Avaana Capital scaling-up support for early-stage startups? What is your strategy for the year?
We have been actively engaging with our portfolio companies, helping them to formulate business continuity plans, repurpose their teams, and shore up their balance sheets. We have also taken precautionary steps to protect their employees’ health and wellbeing. We are fortunate that our investees are in good financial health and have the cash runway for well over a year. In fact, they are exploring business opportunities for new products as the pandemic makes significant changes to consumer behaviours. For example, online insurance aggregator Coverfox set up a virtual call centre within just a few days to help customers choose the right insurance product even amid the Covid-19 crisis. LoanTap is also seeing steady growth buoyed by its robust technology framework.
Our strategy for the year remains unchanged. We continue to seek innovation-led businesses that can create solutions to large-scale problems in India. As part of our responsibility towards the startup ecosystem, the Avaana team is closely working with government authorities to ensure startup companies can continue their operations. We are working on the development of e-kiranas, e-supply chains and startup funding programmes to support the startup community during these challenging times. I believe the pandemic will accelerate digitisation, and startups that have already incorporated digital strategies to provide essential commodities stand to benefit from this situation.
What about the impact on early-stage startups in India? How can they cope up with the on-going crisis?
The lockdown has inevitably impacted businesses of all sizes, including startups. Supply chains are interrupted, offline businesses are suffering losses and the overall economy is moving at a snail’s pace. I expect the business landscape to be volatile for the upcoming 2-3 months, post which the situation will gradually improve.
Startups must maintain their financial health by conserving cash, cutting down on costs and renegotiating their existing contracts. Likewise, taking care of statutory liabilities should be a priority. Other than that, startups need to focus on employee engagement to keep the workforce motivated.
How do you foresee the funding scenario changing in this year?
I think it’s too early to gauge the impact of Covid-19 on the funding scenario. The distress in the global liquidity space may impact the cash flow, and India will face a liquidity crunch as well. When it comes to startup funding, the situation could lead to both positive and negative results. Looking at the bright side, startups may be able to raise more funding once the lockdown gets over due to a sudden surge in demand. Alternatively, the sluggish economy can hurt startup funding. In the long term, however, valuations will rationalise and funding will be available for innovative startups. As investors will become more cautious, deals will take longer to close. But, exceptional entrepreneurs should not face a challenge in my opinion.