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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
COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy 4
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
COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy 7
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
COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy 12
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
COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy 22
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
COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy 40
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
COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy 74
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
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ADDRESS
Credits
Contact: [email protected]
COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy 79