Even as tech startups and SMBs wait for relief measures from the government as revenues fall in the wake of the lockdown, they need to modify their business models to sustain themselves in the post-pandemic period.
By Srinath Srinivasan
The economic turmoil following the Covid-19 crisis has impacted tech startups operating across a range of segments, with many of them apprehending empty war-chests in the days ahead . Co-working space startups, logistics and supply chain tech startups as well as e-commerce companies seem to have taken the hardest hits. “We can expect 50% of this revenue to be shaved off by the time the lockdown is over,” says Gaurav Hazra, senior director and head – India Market Development, Nasscom.
With people working from home, empty co-working spaces are becoming the norm. “We have incurred a loss of Rs 4-4.5 crore for April and May, due to delay in closing deals and also because our customers are now asking for a cut in the pricing,” says Sparsh Khandelwal, founder, Styleworks, a coworking space aggregator.
Khandelwal has a seat count of 40,000-50,000 seats. Styleworks also operates in the corporate events space which has taken a severe hit.
“By March 20, over 52% of the total workforce we used to ferry were working from home, and this fell to a 99% level by March 24, when the lockdown was announced,” says Deepesh Agarwal, co-founder and CEO of MoveInSync. The company transports over 350,000 employees everyday across the country to their workplaces. Agarwal has been spending time with fleet owners and drivers to support them. They have fixed costs and low reserves.
A lot of SMBs and retail outlets are also affected and in turn, the businesses serving them. “Top e-commerce players moved to only essential services when the lockdown began. Post that, SMBs in the market moved only to essentials. Our merchant devices imports from China got disrupted. When the lockdown is lifted, we expect a surge in transactions for a few days. We have to deal with the surge while managing a lot of backlog,” says Byas Nambisan, CEO, Ezetap, which provides digital payment solutions and services to merchants, connecting with banks and customers. “A number of deal closures are really delayed now,” he adds.
One of the largest players in offline-to- online retail space is MagicPin which monitors close to 400,000 retail businesses on its platform. “In last week of March, there was a 90% decline in all discretionary categories in the retail space. A week before, we saw a surge in grocery and essentials category but it came down after that.” explains Anshoo Sharma, co-founder & CEO, MagicPin.
A big concern that is starting to build up is their depleting cash reserves. Aman Gupta, co-founder, boAt, a homegrown consumer electronics startup, says, “Our inventories with e-commerce players will last for 15 days if deliveries begin. Our imports from China are stopped. We don’t intend to fire anyone now but our cash reserves may come down in a couple of months to the point of total disruption in operations.”
Siddarth Pai, founding partner, 3One4 Capital, says, “The days of easy money is over as of now. The days of discounts and cashbacks are gone and subsidies that were given to customers will also go out.” According to him, companies in attention economy—media, content, edtech, health care (telemedicine) and in productivity applications will gain the most post this crisis.
This is true as ed-tech startups that rely on content primarily have gained a lot during the lockdown. For instance, Byju’s saw a 150% increase in traffic on its learning app after it allowed free access in March 2020. KopyKitab, another edtech startup, reported 200% increase in sales in the last week of March and first week of April. In the telemedicine space, DocOnline, a healthcare platform, has seen twice the demand as in the last week of March compared to the beginning of the month. On an average, 20,000 people consult on the platform.
The question of “what next” looms large. Entrepreneurs hope that the government will give a stimulus to SMBs, small retail businesses and the whole ecosystem. Pai believes that startups that are surviving today – in deliveries, telemedicine, productivity tools, stock broking and media/content businesses, have great scope and should work their way up the value chain by offering more features and solutions. He also expects that a financial stimulus package from the government for the SMBs and the startup ecosystem will ensure cash flow.
Nasscom’s Hazra says that companies should try modifying their business models to sustain during the tough times.
He is a part of the team that has recommended relief measures to the government on areas like taxation, cash liquidity, ease of doing business and measures to reduce job losses.