5 Times Growth in Tech Start-ups with Over 6 Months Runway: NASSCOM's Report

In NASSCOM's latest report, the tech startups ecosystem has been studied closely. With the onset of pandemic, various things have changed in the business landscape. As per Startup-Pulse Survey 1 (SPS-1), which was conducted between April and May, stated that almost 2/3rd tech start-ups have a runway of less than 3 months. Tech start-ups focused on identifying survival strategies and disruption across the value chain. During this period, companies started identifying emerging opportunities, immediate survival measures and support expected from all stakeholders. 

A different picture emerged in Start-up Pulse Survey 2 (SPS-2); tech start-ups in the country were on a gradual road to recovery. A five times growth in tech start-ups with more than six months runway. Short term priorities and long term strategies adopted by tech start-ups to tackle COVID-19. Companies implemented diversification strategies and increased focus on deeptech, AI and emerging verticals. They cautiously optimised their outlook. According to the survey, less than 50 per cent startups  are anticipated  revenues to pick up within the next 6 months. 

Behaviour of startups changed to cope with pressures of pandemic. Here are some findings relating to business recovery, strategizing and sector outlook 

Business Recovery

Tech start-ups faced losses down by three times since SPS-1. A 2.5 times growth in tech start-ups have been seen in 3 months along with the runway as compared to SPS-1. More than  20 per cent tech start-ups have lifted the hiring freeze. Startups in edtech, fintech and healthtech sectors have registered faster recovery.

Strategic Interventions 

Product innovation and funding availability were persisting challenges for startups. Strategies that were adopted by start-ups to tackle COVID-19 were: 

Short Term: Cost optimization, product diversification 

Long Term: Focus on Deeptech, expanding to new verticals

In addition, product diversification has become the new normal for startups

Sector Outlook

Over 50 per cent start-ups expect revenues to reach pre-COVID levels within 6 months.  Ecosystem stakeholders taking multiple initiatives for start-ups such as grants and incubation programs etc. 

Key imperatives that have been taken by the startups are focused on operational excellence, portfolio diversification, collaborative approach, encouraging digital first models and making India Atma Nirbhar.

During the initial phase of pandemic, 92 per cent startups suffered while 4 per cent witnessed business growth along with 4 per cent, which were not impacted at all. In comparison, 30 per cent startups have recovered and seen positive growth during October and September.In the cited time period, 51 per cent companies were still harshly impacted. 

NASSCOM’s survey stated that nearly 27 per cent of seed stage start-ups and 27 per cent of early stage start-ups have been recovering faster. Approximately 25 per cent of start-ups each in edtech, fintech, healthtech and retail tech have recorded recovery. While, roughly 30 per cent B2B startups have recorded rise in revenues. Further, 4 startups have become unicorns during the pandemic and 22 acquisitions have happened from April to August 2020, of which 19 were in the B2C space. 

These figures show that tech startups still have a long runway and would recover faster than other companies. A speedy recovery is still desired for the Indian startup community.