13 Apr 2020

SCOPE FOR STARTUPS AFTER LOCKDOWN

The Indian start-up ecosystem has always been bubbling with new ventures. It has always moved forward with new ventures. But how many of these ventures succeed? According to a survey, 9 on 10 start-ups in India fail because of lack of innovation, funds and human resource. There are numerous venture capitalists that enter the Indian market and invest in them now we have a few pointers about this too. The covid-19 crisis is on its peak with businesses shut down and not operating but the expenses are still moving forward. This will have a huge impact on this ecosystem. The ideas behind the start-ups will change too.

The major reason why a person starts a company is because of passion and innovation. This is the textbook language. But if we actually analyze this, the major reason stems from unemployment. Our motherland has an unemployment rate of about 24% right now and it is said to shoot up even more after this new lockdown is over. A college student studies day and night to get into the best college. After that he studies in the college and gets a job. The catch here is that the starting of his job will be six months after he graduates. During these six months, the child has a very easy-going life initially but later on he realizes that due to the pressure from the society, he has to work. So, he gets up, starts a start-up! Now in these remainder months, how long do you think he spends on the actual business model, target market, and customer retention? Everything is done in such a hurry that the main essence is lost. But thankfully, the person already has a job so he can recover his losses and move on. This is the whole story about the Indian start-up culture.

Now if we talk about right now, there are no jobs, there is unemployment. The already existing start-ups will shut down in near future because of lack of funds and support from their peers. For the early age start-ups, rather than worrying about marketing and increasing the operations, now they have to worry about their own existence. They have no money; they have a large amount of fixed expenses and salaries. Start-ups have laid down their employees on the grounds of not having enough capital. If the big firms are not able to survive this hit, how will the infant companies do?

31% of Indian start-ups decided to lay off its employees because of the zero operational revenue being generated during this time. According to another survey, 37% of the Indian start-up CEOs said that they only had cash reserve for the urgent activities for the next 6-12 months and nothing beyond that.  It is safe to say that the already existing start-ups are on the verge of falling and millions of dreams of people who wanted to be called ‘entrepreneurs’ might not come true.

The major reason stated above for the starting of a company is unemployment. The government promotes start-up culture in the name of funds and donations but the major backlash here is that the government is trying to hide its own shortcoming which is to provide people with employment. A person, who has a job and a decent salary, would never dream to come out of that and start a new venture without proper examination of the market.

Hike, an Indian company that came up was quite popular during the old times. Hike was India’s most popular homegrown messaging app with more than 100 million users. But what happened to hike? Do we use it right now? The answer is no. In 2017-18, hike started cutting down its costs to survive in the competitive market. Later on, Hike reported 33% fall in FY19 revenue even as expenses were brought down. Now the major reason here could be of having a copy-paste model. WhatsApp was introduced way before hike and that gained popularity. Hike was just a copy of that. This is why it couldn’t actually work. It did not solve any unique purpose.

Similarly, there was another copy made in India in the cab segment. Our homegrown company, Ola. Ola has been under losses since its inception because it again does not solve any purpose. There is a lot of competition going on right now in this segment. Uber has been a lifesaver with the greatest number of customers.

These start-ups create a customer base by giving huge discounts. When they have given the discounts, there seems to be a lot of loss incurred. They feel that now they can finally make some revenues with the new customers. But the issue in the Indian market is that when one company increases the price, the other one reduces it and since there is no brand loyalty in the Indians, they choose the next best alternative. So, the customers who were to be converted initially into profitable units, never happens and hence the vicious cycle of losses keeps circling up.

The amount of money the venture capitalists put into a company also strengthens the structure of the company. Here, the FDI policies have been strengthened so we can say goodbye to Chinese investors who used to be like our mentors and loan giving banks. Chinese had invested in the major Indian unicorns that flourished and scaled up.

After this pandemic, new start-ups will come due to unemployment and we hope that they come out with new and feasible models that are adaptable in India. They shouldn’t have copy-paste modules. There have been some companies who are doing extremely well in this scenario and there has been a hope of recognition they would receive after the pandemic ends. Atron, a start-up based out of Mumbai, the major area which is hit by the virus, is sanitizing public areas like hotels and clinics. It was said that they would have a surge in their prices but to the contrary, this never happened and they showcased the main reason why they were set up, the welfare of the society. Now innovative models like this might go ahead and make a name for them but baseless models will be completely wiped off.  There are a few impressive models that would actually get through, but for the ones who are just into fetching services from one place and providing it to the next, they will have to say goodbye. New start-ups would emerge and it would be a great delight to monitor them!

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