Status of Startup Funding Post Coronavirus

The year 2019 was a blockbuster year for India where the companies drew a huge number of international investors to the domestic shores. Nine startups went on to join the prestigious Unicorn club. Startups like Udaan, OYO Rooms, Paytm and Delhivery grabbed some of the most amazing deals of the industry. This naturally spurred on high expectations from the year 2020 too. Though the year started great, the outbreak of COVID 19 dampened the spirits. The pandemic adversely impacted the process of funding in startups, thus leading to a severe liquidity crunch in the industry. Markets have crashed, venture capitalists have become more cautious in their spending and even the so-called deep-pocketed investors have started putting off large deals for some time. Let us take a closer look at how it is impacting the startup funding scenario of the country.

Drastic Drop in March

According to recent data, startup funding has dropped by 50 per cent in comparison to previous months along with a 22 per cent year on year decline in the same for the first 2020 quarter. This reveals significant slowdown caused by the nationwide lockdown coupled with a sluggish economy. Several tweaks were made by the Indian Government to curb any kind of hostile takeovers and acquisitions during the pandemic. It is expected to dry up further funding and add to the woes of the startup companies already struggling with the cash crunch.

Increase in Investor Interest in Certain Sectors

The COVID-19 pandemic has brought about a drastic change in the investment patterns of the venture capitalists. Their focus has now shifted to startups working on providing solutions through machine learning and artificial intelligence along with providing automation and monitoring solutions. Alongside, companies working in the FMCG sector, home entertainment and online grocery deliveries have attracted interest.

Even though the pandemic has harmed the investment scenario of the country, it has also opened up various new opportunities in sectors previously thought to be defunct. The focus has now shifted to essentials and startups involved in FinTech, EdTech and cybersecurity. Many companies involved in the same are showing trend defying growth, giving a ray of hope to investors.

For the remaining year, the industry hopes for a positive turn. Companies have started altering their business models to adapt to the new post-pandemic times to be more exact and precise about the cash flows. However, to bring the startup industry back on its pace, efforts are required from the three pillars of the industry- the Government, the Corporates and the Venture Capitalists.

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