COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy
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Content 01
Scope Of The Report
02
Executive Summary
03
Introduction
04
Global Economic Impact Of The Pandemic - Impact On Production - Impact On Supply Chain - Impact On Consumer Demand & Purchasing Power
05
Impact On Employment In India - Sector-wise Impact - Startups Take Unenviable Lead In Layoffs
06
Investor Uncertainty Indicators
07
The Need For Intervention
08 SigniďŹ cance Of Startups In The Indian Economy - GMV Of Indian Startups - Generating Employment - Aggregate Expenditure Of Indian Startups
09 Indian Startup Funding Activity: Q1, 2020 - Funding Trends - Sector Wise Analysis - Stage Wise Analysis - Mergers & Acquisitions - Top Investors - Future Perspective
10 The U Turn: - Creative Destruction And The Advent Of New Age Economy
ontent 11
14
Sectors Witnessing A Boost
The Worst Impacted Segments
- 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
15 Methodology & Glossary
- Hyperlocal And Ecommerce: Essentials In Focus - Logistics And Supply Chain - Healthtech
12
Customer Perception Analysis: India - Hyperlocal Delivery Application - Video Conferencing Applications - Remote Workplace Applications
13
Emerging Trends In The India Startup Ecosystem
- 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
16 Bibliography
Scope Of
COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy
4
01
Scope Of The Report 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.
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Executiv
02
Executive Summary
$320 Bn
The total impact of the 40-day lockdown on India’s GDP
31%
VC-funded Indian startups that have undertaken layoffs
60%
Growth in BYJU’S downloads after it announced free courses and learning modules
17 G20 countries have witnessed a contraction in their manufacturing purchasing manager index
6-12 Months Runway of cash reserves for the majority of Indian startups
38% The growth in mobile game downloads globally
8.64% The decrease in total passenger vehicle production of India in February 2020 compared to January
$4.1 Bn Secured by Indian startups across 208 deals in Q1 2020
73% The surge in the total session time per user for Netflix in India
80% Decrease in mobility for retail spaces such as restaurants, cafes, shopping centres etc.
$13.7 Bn The expense incurred by top 50 Indian startups in FY’19
14.2x The difference between the revenue loss inflicted by the 40-day lockdown and the government’s stimulus package
ntroducti
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Introduction The 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 smallscale 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.
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COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy
Possible Scenarios For The Indian Economy In The Post COVID-19 World India’s GDP will suffer worse if lockdown is extended to Q2 FY 2021
Real India GDP Similar to the price the total volume was also at its 2 months high— 230.7 Mn, on March 24th 110
1 to 2
100
Daily % Change
Approximate India GDP growth, FY2021 over FY2020,%
Scenario 2
Scenario 1
Scenario 3
90
-2 to -3
80
70 Q4 FY2020
Q1 FY2021
Scenario 1 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 monetary stimuli (some measures Source: McKinsey already announced)
Q2 FY2021
Q3 FY2021
-8 to -10
Q4 FY2021
Scenario 2 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
Scenario 3 Lockdown as in scenario 2, with additional 2-3 week lockdowns in Q2 and Q4 FY 2021 because of virus resurgence Low labor availability because of limited reverse migration Stabilization and stimulus package even broader than in scenario 2
lobal Ecn
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04 Global Economic Impact Of The Pandemic
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COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy
Production Impact: Purchasing Managers Display Negative Sentiment Countries
PMI Index (February 2020)
PMI Index (March 2020)
Difference
Italy
48.7
40.3
-8.4
Indonesia
51.9
45.3
-6.6
France
49.8
43.2
-6.6
Canada
51.8
46.1
-5.7
Euro Area
49.2
44.5
-4.7
South Korea
48.7
44.2
-4.5
Turkey
52.4
48.1
-4.3
United Kingdom
51.7
47.8
-3.9
Brazil
52.3
48.4
-3.9
Japan
47.8
44.2
-3.6
Mexico
50
46.9
-3.1
India
54.5
51.8
-2.7
Germany
48
45.4
-2.6
United States
50.7
48.5
-2.2
Russia
48.2
47.5
-0.7
South Africa
44.3
48.1
3.8
Australia
44.3
53.7
9.4
China
40.3
50.1
9.8
Source: Institute Of Supply Management, DataLabs Analysis
mpact on
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Impact on Employment In India The 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%
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COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy
Startups
Source: Compiled by Inc42 Media
Pay Cuts
Layoffs Senior Management
Founders
Employees
No
Yes
Yes
No
No
No
No
No
Yes (6-7%)
Yes
Yes
Yes
No
No
No
No
No
No
Yes
No
No
No
Yes
No
No
No
No
No
No
No
No
No
No
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes (30%)
Yes
Yes
No
Yes (20%)
-
-
-
Yes (10%)
-
Yes
-
Yes (10%)
-
-
-
No
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes (30%)
Yes
-
Yes
No
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes (10%)
Yes
Yes
No
Yes (30%)
Yes
Yes
Yes
Yes (50%)
-
-
-
No
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes (40%)
Yes
Yes
Yes
nvestor U
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06 Investor Uncertainty Indicators
he Need
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07 The Need For Intervention 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.
ignifican
31
08
Significance Of Startups In The Indian Economy 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).
ignifican
09
Indian Startup Funding Activity: Q1, 2020
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COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy
Startups Acquire Startups In Q1 2020 A whopping 79% of the total acquisitions in Q1 2020 featured startups as buyers
NoBroker 1
Freshworks 1
NestAway 1
Sachin Bansal 1
Goscale 1
ClearTax 1
Digital Vidya 1
LetsTransport 1
OYO 1
Easypolicy 1
MyTVS 1
PreLoved Devices 1
ShareChat 1
ShopUp 1
Shriram Automail 1
Square Yard 1
Urban Company 1
Titan Company Ltd 1
Zomato 1
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
Expansion of the user base
Killing the competitions
Acquisition of unique techonlogy
Sequoia Capital
19
Accel Partners
14
Jain International Trade Organisation (JITO) Angel Network
8
AngelList
7
Venture Catalysts
6
Chiratae Ventures
6
LetsVenture
5
Omidyar Network
5
Blume Ventures
5
Trifecta Capital
5
Deal Participation
Top Investors
he U Turn:
43 43
10
The U-Turn: Creative Destruction And Advent Of New Age Economy 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.
ectors Wi
11
Sectors Witnessing A Boost
45 45
Customer
64 64
12
Customer Perception Analysis: India 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.
merging
70 70
13
Emerging Trends In The India Startup Ecosystem
he Worst
73 73
14
The Worst Impacted Segments
COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy
The Worst Impacted Sectors In India Sectors
Travel and Tourism
Impact
Cost
The COVID-19 pandemic could cut 50 Mn jobs worldwide in the travel and tourism industry.
A decrease in GVA from the tourism sector in the country. Clubbed with major layoffs and salary cuts of the employees.
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
OYO said it expects 60% lower revenues in the months to come
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. Automobile & Electric Vehicles
A possible shortage of auto components in the coming quarters, along with a decline in production of BS VI compliant vehicles
30% of tyres are imported from China China exported $773 million worth of lithium-ion batteries to India in FY’19
125-plus malls along with 100 attached multiplexes affected by Covid-19 outbreak in India.
Retail & Ecommerce
Closing down of stores, layoffs and salary cuts
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
As work from home becomes the new modus operandi, coworking spaces have become isolated.
Shared Living & Coworking
Higher investments expected in hygiene and cleanliness technology. More reliance on robots and automation for providing service
Shutdowns, layoffs and salary cuts, asset depreciation, revenue loss
74
Methodol
76 76
15
Methodology & Glossary
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.
Nomenclature: 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 Index
Bibliograp
77 77
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Bibliography Big.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-omidyarto-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-forindian-auto-component-industry-icra/article31247101.ece https://www.indiatoday.in/india/story/coronavirus-lockdown-hundreds-stranded-truckdrivers-face-hunger-bribery-1661077-2020-03-29
COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy
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w w w. i n c 4 2 . c o m 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.
Credits www.datalabs.inc42.com 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 â&#x20AC;&#x201D; 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.
Contact: datalabs@inc42.com
EDITED & COMPILED BY Sandeep Singh Nikhil Subramaniam Naga Jayadeep Akula
DESIGN & INFORGRAPHICS Sabith
ADDRESS Inc42 Media 59/16, 4th Floor, Jujhar Tower, RD Marg, KalkajiNew Delhi, Delhi 110019
COVID-19 Startup Impact Report 2020: Threats & Opportunities For The Indian Economy
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