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“Startups should pitch on their ability to repurpose quickly”

Dr Rajat Agarwal, Associate Professor, IIT Roorkee, feels that Indian startups have a huge advantage due to domestic demand. He adds that higher responsiveness, lower overhead costs, good team of mentors and support of educational institute-based incubators will be critical for success in the post-COVID era.


TPCI: How is the COVID-19 crisis expected to impact investor confidence towards Indian startups? What will its effect be on the choice of targets (sectors, nature of startups, etc) and quantum of investments?

Dr Rajat Agarwal: Investor will be investing in startups considering their agility and performance. COVID-19 has suggested that agility combined with innovativeness will be two most important dimensions for success of startups. How quickly you can repurpose your organization? I feel, investors will have more confidence towards Indian startups. They will love to fund areas such as online education, online assessment, telemedicine, online entertainment, online news services, healthcare equipment, AI-based solutions, cloud computing, cyber security, SAAS etc. Startups in hospitality and apparels will go through tough times to get confidence of investors.

TPCI: For startups facing an imminent downturn in demand, what would be the most appropriate turnaround strategies in terms of operational and revenue models? Please mention examples of startups that are showing promise in this regard.

Rajat Agarwal: Startups having some face-to-face meeting as part of their process or product component are facing maximum heat of COVID-19. As all other experts say, most appropriate strategy is to reduce the need of face-to-face meeting and go online. Startups like “Sirfcoffee” and “Myscoot” have changed their business model by offering online meeting for large number of young countrymen who used to avail their services for going out. Similarly one startup from IIT Roorkee, “log9” involved in the field of nanotechnology, has diversified their product line to provide nanoparticle-based sanitization solutions. The most important point in favour of startups is that they are not carrying any heavy baggage on their back.

TPCI: Considering that new funding may be hard to come by, what should be the approach of startups towards survival in the short term?

Rajat Agarwal: I feel that new investors will try their luck in startups. Stock market and real state market also performing badly, so many traditional investors may be available for startups. At the same time, government is also very much concerned about low economic activities. Various schemes with liberal conditions will be available for startups. Government of India is going to focus on Self-reliant India. Government focus on local, which include more purchase from local enterprises will help startups during this tough time.

At this time, startups need to accelerate the product delivery cycle. More and more application of design thinking is required. They also need to clear excess load on them. Make use of SAAS, co-working communities for reducing overhead costs. Go for Digital marketing. Stop using costly promotion avenues involving celebrities. India is seeing new celebrities known as “Corona warriors”, use them for brand endorsements.

TPCI: What interesting opportunities do you see emerging for startups in the market environment post-COVID? Which segments are looking promising at the moment?

Rajat Agarwal: Most of the opportunities are in technology and healthcare areas. Opportunities will be in online education, online entertainment, telemedicine, online training. But focus will be on products from local organizations. This will help Indian startups to get huge demand within country. A lot of scope will be in analytics area also including startups providing services based on AI, ML etc.

India is considering “JAM” as game changer for holistic development. JAM i.e. Jan Dhan, Aadhar and Mobile has helped government in bringing bottom of pyramid population into the mainstream of development. Startups related to JAM will see interest of investors.

TPCI: What should be the change in approach for new startups trying to make pitches to investors in the post-COVID world?

Rajat Agarwal: In post COVID environment, startups should pitch on their ability to repurpose quickly. Role of incubators and availability of good mentors with new startups will also be important considerations. New startups should be innovative startups. If a new startup pitches with this strategy of being responsive, lower overhead costs, team of mentors, support of educational institute based incubators, there are high chances of getting success.

TPCI: There was an overwhelming preference towards rapid growth and higher valuations in startups over the past few years, which also came at the cost of profitability. How will this change post-COVID in your opinion?

Rajat Agarwal: Startups used to focus more on valuation. Exit strategy is one important part of startup ecosystem. To get good value at the time of exit, startups used to follow “hockey stick curve”. Hockey Stick curve explains fast increase in valuation. Sustainable startups will not focus on hockey stick curve and will like to move with traditional half s curve. Startups should focus on steady growth. I will like to suggest depth over width.

Many startups increased their valuation using investors’ money. It is important to improve valuation using your core business. Profitability can be compromised for offering value to the customers. But this value should not come from investors’ money by offering huge discounts. Charge reasonable but use investors’ money for scaling the operations.

TPCI: How well positioned are Indian startups in comparison to their counterparts in other parts of the world to drive the next phase of growth, positive disruption and innovation post-COVID-19? What initiatives (across stakeholders) will help them achieve this potential?

Rajat Agarwal: Most important thing in favour of Indian startups is huge local demand. We need to fully leverage this demand to make Indian startups competitive. Huge talent available in India can provide resources to startups at a competitive rate. Post-COVID, global migration may also stop for some time. It will be a golden hour for Indian startups to use these skillsets to their advantage. Post-COVID, consumption patterns may also change. Upper middle class of India will look for avenues for investment. Government may facilitate investment from these people in startups.

Growing need of digital services will also provide huge market to Indian startups. Overall, Indian startups have a bright future, if they can sense the wave, remain agile and focus on steady growth rather than higher valuation.

Rajat Agarwal

Dr. Rajat Agrawal is a member of faculty at Department of Management Studies, IIT Roorkee. He is also associated faculty at Centre of Transportation Systems and Centre of Excellence for Disaster Mitigation and Management at IIT Roorkee. He is IPR Chair of DPIIT, Govt of India at IIT Roorkee. He is Co-PI and Cocordinator of Design Innovation Centre, IIT Roorkee. His research interests are Operations Management, Innovation, IPR and Indian Knowledge Systems. 
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