Where will the world head to in the coming days is quite a big question! With the government extending work from home till end of this year, the future of the corporate world is still bleak. India is entering into the phase of community transmission and the number of cases has just put the gears on. Despite the economy suffering, most of us are optimistic about the future. However, today from corporates to startups & investor community, every sector is travelling through difficult terrain. Despite known as a rising startup ecosystem, India’s startup ecosystem is experiencing lack of fund in-flow, as 33 percent startups surveyed by FICCI-IAN said that the investors have put the investment decision on hold while 10 percent mentioned that the deal have been called out.
But where is the startup and investment community heading from here? What is the way forward and how is the investment community working towards strengthening the foundation further? To know the answers, I interacted with Vikram Gupta, Founder & Managing Partner, IvyCap Ventures. Vikram holds over 16 years of experience in private equity, business consulting, M&A, strategy and operations in healthcare & life sciences, education and consumer goods.
What is the biggest issue the startups & investors currently face?We are all struggling with the COVID-19 situation, which has come up as a challenge both for startups and investors alike. Coronavirus has emerged from nowhere and no one ever predicted that everything will shut down from March onwards and things will continue to be like this for a while.
So what is the biggest challenge? It is the substantial and in certain cases, permanent changes in the mindset of the people and the consumers that startups are catering to and therefore, that has made the founders of the startups to rethink, reimagine and recreate their own plans. In certain cases, things are looking more positive in the next couple of years compared to pre-COVID era, but in certain cases it’s already looking bleak and grim.
Hence from an investor’s perspective, we have to be very detail-oriented and understand the things changing, what is getting impacted & what not, how are founders dealing with it, how are people becoming nimble and using cash, how people below the line are reacting to it, how the founders are dealing with their own people & engaging with their customers, and making the investors feel comfortable. No doubt, there are multiple issues at multiple levels that both startups and investors are dealing with right now.
Where do you see the investments moving currently and what kind of startups will get funded? Also tell us about the kind of startups we can see IvyCaps funding & mentoring.Most of the investors including us are going back to our own portfolio and looking at where they need support while identifying their struggling points. We are also determining the ways to help them modify their business need model while ensuring they have enough cash to sustain and come out of this crisis positively.
So what are we doing as investors apart from ensuring our own portfolio is secure, healthy and un-impacted? Any investor who has received a term sheet just before COVID or evaluating any business for investment during that time would take a step back and analyze changing assumptions, and investment opportunities. Post which it’s time to go back to the whiteboard, relook at the forward looking plans and find the situations we have control on, and predict the future of the business. This helps ensure that the investments don’t get completely impacted but may get delayed to some extent.
On the other hand, we investors are analyzing and dealing with the new shift in the ecosystem created by COVID, which has pushed everything online. Also banning the 59 Chinese apps have created a vacuum in the industry which many startups are filling in. I am very positive about these opportunities and see such tech-based startups getting major funding and mentoring from the investors. However, as the market gets cluttered with similar apps, it is crucial for investors to find those that will fulfill the need of the market.
These are interesting times while being challenging too. Entrepreneurs who really understand the bigger picture and know how to tackle them will benefit the most as they will be successful in gaining the trust of the industry. And investors who understand this will put their money in the right basket and therefore gain substantially for the next few years. In my view, some of the investments happening now may become unicorns very soon, which you may have never expected few months back.