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Covid-19 impacts on Startup Ecosystem


Pay cut and Taxes

Did you know that the COVID-19 Pandemic is set to have economic impacts of USD 2 Trillion? Since Lockdown 4.0 has been implemented, several businesses have sighed relief. Economic activity is allowed in all zones with certain restrictions to accept containment zones. Reports suggest that 9 out of 10 startups have witnessed a decline in revenues. Not only that nearly half of the registered startups have reported a 40% decline in revenues and 30% have shut shop. Safe to say that businesses will have to tweak their business models to better adapt to the post-COVID-19 world.

Main culprit of this startup catastrophe is the global shut down of supply chains. Among the startups, travel and tourism based have seen the meanest phase in the last two months. Whereas on the other hand, startups with their business models in sync with Edtech, Fintech, Health and wellness have seen shots of green.

A columnist has placed COVID-19 Pandemic among the most influential events of modern society right beside the great depression of 1930, fall of the Berlin Wall, bombing of Hiroshima and Nagasaki, and the 9/11 terrorist attacks. All these events have changed the way we live forever. And it’s safe to say that, post COVID-19 world will be different nonetheless. There exists a mutual consensus that Business Models will have to change for good.


Impact on Business Models

Lets explain this by an Instagram Caption i saw few days back. It read “It’s crazy how we used to accept food deliveries with our bare hands before“. Such a thing would require, masks, physical distancing, e-payment, and contact-less delivery. In a nutshell, a major revamp to the business model will be the need of the hour.

And this is just the tip of the iceberg. Incidents of food delivery executives unknowingly spreading COVID-19 will just add fuel to the fire. Not only the food delivery startups, but also those in ride-sharing, e-commerce, and travel-tourism based startups will have to go back to the drawing board to figure out their value proposition and adjacent business models…Its like Deja vu all over again.

And Businesses have responded as well. Many have started advertising their safe and sensible way of doing business. While many startups are still scratching their heads over their ideal Business Models, some are seeing this as an influx of opportunities. For instance, several drone-based startups have inflated their core competencies from a mere Drone-based delivery startup to a full-blown aerial Sensitization startup.

Another trend that was often considered a far fetched idea has now emerged, i.e allowing employees to work from home. Many Startups especially Tech-based have recognized the work from home option as a valid and cost-saving instrument. Social Media giant, Twitter has also allowed it’s employees to work from home on a permanent basis. Work from home can also save a considerable sum on vile Fixed Costs and allow startups with much-needed liquidity.

Vinish Kathuria, Managing Partner at SenseAI voiced his opinion on the matter by saying “We are used to the high-touch, high-contact environment. We have to enable contact-less interactions as we live in the new environment” Unquestionably, Business Models will have to be modified if startups want to remain competitive and resilient in the post-COVID-19 world.


Impact on Businesses

The impact of COVID-19 on Business has been speculated and debated for a long time now. Several publications are convinced that we are headed towards a recession. Japan the world’s third-biggest economy has officially announced that it slipped into recession. And the world knows that it’s just a matter of time that waves of economic fallout reach the rest of the world from the Land of the Rising Sun.

Many startups have been forced to undertake several cost cutting measures like laying off, postponing expansion and growth projects and giving pay cuts. All this in a desperate attempt to save cash and remain buoyant.

According to a recent Nasscom survey, as much as 90% of the startups are experiencing steep falls in revenues. Many have also lobbied for Government support and bailouts. Strong voices recommending that the Startup India accelerate the fund disbursement with extra cash provided at the preliminary stages.

Startups were given a breather when FinMin Nirmala Sitharaman announced the revised criteria for MSME in the Atmanirbhar Bharat Economic Package. The criteria for registering as an MSME has been revised from Investment in Plant & Machinery to Investment and Annual Turnover.

Sure the Government announced several relaxations in terms of reduced TDS/TCS rates by 25% and allowed collateral-free loans worth INR 3 Lakh Crore. The impact of which will be seen in Q4 and Q1 of FY 2021-22.

Ending this blog by quoting the Illustrious Industrialist Mr. Ratan TATA, “In past difficult times, entrepreneurs have displayed farsightedness and creativity that could not have been believed to exist. These became the flagpoles of innovation and new technology today. I hope that the ability to find another way to build a product, run a company, run operations a better way, will emerge as an outcome of the current crisis

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Rk says:

2020-05-26 11:38:33

Keep it up

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