The ability to cope with uncertainty is coded into the DNA of startups. Yet, even the most motivated and hardy of the young lot would not have dreamt of navigating a contagion-driven situation prevalent today. The only way they can survive these taxing times is by finding their trait to tweak offerings and alter paths quickly — of course, that is if they have the money to ride out this coronavirus pandemic.

Take Bengaluru-based Furlenco. It can’t run operations because of the lockdown, says Ajith Mohan Karimpana, founder and CEO of the online furniture startup. Yet, the company not only raised $10 million on April 2, but has also shown resilience in a severely disrupted economy. Its subscription model that covers 100,000 customers has kept the cash registers ringing, though it has not been able to add to the user base. “One can never plan for scenarios such as Covid-19. Besides, business continuity planning was never a term for startups,” adds Karimpana.

“Our operations are fully shut. But the power of subscription has played out for us” Ajith Mohan Karimpana, CEO, Furlenco

That term is mostly associated with established companies than young startups, which focus more on being adept and agile to deal with changes quickly. In late 2019, startups were focusing on being agile as investments were drying up after a fiasco at WeWork: the SoftBank-funded coworking company that was touted as “the next Alibaba” lost nearly 80% of its valuation in less than a year and had to shelve its IPO plans after being battered by reports of poor governance issues. Valuable lessons on unit economics and profitability from this incident would have helped startups deal with 2020 in a better way, if not for the nightmare called Covid-19.

“It will be a different new normal when the lockdown is over. This is a big turning point for outside hospital care” Meena Ganesh, MD & CEO, Portea Medical.

Suddenly, startups that were looking for growth avenues were scrambling for ways to survive. The smart ones, however, have learnt to adapt. Delhi-based Atom Drones, which uses its drones to provide mapping services, has now customised four of its dozen-odd flying machines to fumigate streets in Covid-19 hotspots like Nizamuddin, Delhi. The modified machines can carry up to 10 litres of a disinfectant and spray it across a wide area. Zomato is doing contact-less delivery and has extended its subscription-based diningout membership. Portea, which usually has clients calling for physiotherapy sessions, is offering chemotherapy at homes as people can’t go to hospitals.

“Our operations are fully shut. But the power of subscription has played out for us” Ajith Mohan Karimpana, CEO, Furlenco

Snake & Ladder
Tough Days Ahead For -Startups in travel -Those with linkages to US, Europe markets – B2B ventures, as clients check spendings -Those selling non-essential goods -Startups with challenging unit economics

Opportunities Looking Up For
-Startups in edtech, healthcare, cloud, AI & business applications -Startups catering to essential, daily needs -Last-mile delivery firms -Cloud kitchens -OTT, social and gaming platforms

Revv is offering its fleet for free to healthcare workers. Dunzo is delivering essentials and doing last-mile delivery for companies like Britannia Industries.

These are just a handful of startups that have customised their offerings to ensure they can stay above the water while providing much-needed services at the hour of crisis.

“It has been busier than ever for us. We have been busy assuring customers that it is not the time to exit” Atul Shinghal, founder & CEO, Scripbox

Online on-demand service provider Housejoy is using its plumbers, electricians, carpenters, mechanics and other personnel to deliver essentials to senior citizens. “All of them have twowheelers and so we are helping with last-mile delivery for senior citizens,” says founder & CEO Sanchit Gaurav. “We have also trained our staff to fumigate public areas.” It has tied up with local authorities in Bengaluru for fumigation. The startup has two service lines — providing at-home services and construction. The former can’t function now as the staff can’t move around and the latter can’t execute projects till the lockdown is lifted. “Even after the lockdown is lifted, it might take about four months for things to get back to normal,” says Gaurav.

Sailing in Stormy Seas- Things startups are doing during the lockdown
Atom Drones is using its drones to fumigate streets Dunzo is delivering essentials and doing lastmile delivery for companies like Britannia

myUpchar is creating lot of health content to keep people aware of Covid-19 Portea is offering chemotherapy sessions at home Revv is offering its fleet free for healthcare workers

ScripBox is doing webinars to keep investors calm Zomato has contact-less delivery, and has extended the subscription time for Gold members

Such has been the impact of the lockdown that Q1 ( January-March) of 2020 recorded the lowest levels of private equity investments in the past 30 months. From $9.5 billion in Q4 of 2019, investments have dropped to $5.71 billion in Q1 of calendar 2020. Some startups in areas such as edutech, online gaming, collaboration or healthcare might be better off. But those in early stages will face difficult choices. Sanjeev Krishan, partner & leaderdeals, PwC India, says, “Even in the normal course of business, startups face a high degree of uncertainty. That has got compounded with Covid-19. Their business models will be tested a lot more.”

No wonder they are looking for engagement with customers even if they have to deviate from their usual course of business. Take the case of Bengaluru-based B2B HungerBox. The food tech venture caters to around 500 cafeterias or food courts in offices. But all of them are shut now. So HungerBox has absorbed some of the staff from its food vendors and deployed them at offices that the government has categorised as critical functions and are not shut.

Sandipan Mitra, CEO and cofounder, says, “When you know the business is going off the rails for two weeks, 20 days or two months, you can plan accordingly. But with Covid-19, it is extremely difficult to engage in business planning according to the usual convention.” HungerBox is also serving free meals to local communities where it operates and trying to help its food partners. Mitra adds, “If there is disruption on the consumption side, as is the case now, it puts off the entire supply chain. We are keen to support our partners, so they can keep the lights on.”

A big challenge for these ventures is to find a way to cut costs during this uncertain phase. Ankur Pahwa, partner, EY, says, “Discretionary spending sectors will have to figure out a way to build a revenue stream. While they may not get new funding, it is a good time to stay in touch with existing investors in case the companies need to be bailed out.”

Most startups want to protect jobs and also help their partners. But how long can they do it remains to be seen. Some are walking a tightrope. Milk Mantra, a B2C venture supplying milk and dairy products to customers, is taking it one day at a time. “Balancing the top line and controlling costs are like a daily mantra for us,” says Srikumar Misra, founder. For some ventures, reassuring clients to stay on are a bigger priority now than ever. A lot of people who invest in mutual funds have become jittery due to volatility in the stock markets. Atul Shinghal, founder and CEO of Scripbox, says, “It has been busier than ever for us. We have been busy assuring customers that it is not the time to exit. This also reinforces that time in the market is more important than timing.” Shinghal and his team at Scripbox, which focusses on mutual funds, are conveying this to their 70,000-plus users via webinars, blogging and doing more scenario planning.

While startups are trying to figure out ways to stay relevant, much will depend on the kind of runway or cash they have to sustain themselves.

In the absence of any support other than their own venture investors, conserving cash could be the best option. More so as investors might be reluctant to back very early stage companies as their models are not tested. “In the UK,” says PwC’s Krishan, “the government is helping by absorbing some of the employee costs by paying part salaries.” There is no such backup here so far. Mitra of HungerBox says, “Now money will go into sustainable businesses rather than vanity ventures. Sanity will replace vanity.”

Even ventures in critical sectors such as healthcare, where the disruption is ostensibly little, have had to rejig their offerings to stay relevant. These companies are seeing a spurt in demand as most hospitals have shut their outpatient departments. Portea Medical, which primarily focussed on physiotherapy and home care, is now catering to demand for chemotherapy and delivering injections at home. The in-home-healthcare service provider operates in 15 cities and has 4,000 nurses and paramedics. Meena Ganesh, managing director & CEO, Portea Medical, says, “Covid-19 is a big turning point for outside-the-hospital patient care. There is increasing demand for oncologists, dialysis at home and people are seeking critical care at home.”

Another healthcare venture, myUpchar, which claims to deliver medicines in remote areas to its core customer base in tier-2 and -3 towns is creating health content in multiple languages in partnership with doctors. It is also running home sample collection facilities across 30 cities. Rajat Garg, cofounder, myUpchar, says, “Our goal is to grow 10x in the next few months.” Helping out communities is great. So is changing tracks to divert workforce — like engaging electricians to do last-mile delivery or shifting from B2B to B2C models — in times of need.

But all these are short-term strategies. “This NGO-type focus won’t help startups,” says Pahwa of EY. “They will have to find ways to build revenue streams.” Some ventures like ride-sharing will bounce back quickly after lockdown, while those dependant on subscribers might ask for discounts to keep using services. Pahwa sees consolidation ahead and some ventures even shutting down. Some like Ganesh, however, see this as an opportunity to start new lines of business. “It will be a different new normal when the lockdown is over,” she says.

Apart from changing models, startups could see some slowdown in the flow of Chinese money, after the government indicated that cross-border investments would be subject to approvals. The order came amid worries that investors from China could lap up Indian companies cheaply as valuations are down due to the disruption. According to a recent report by Mumbai-based foreign policy think tank Gateway House, 18 of India’s 30 unicorns are funded by Chinese companies. Overall, Chinese tech companies and funds led by Alibaba, ByteDance and Tencent have funded 92 Indian startups, including unicorns such as Paytm, Byju’s Ola, Zomato and Oyo.

That apart, there are plenty of other challenges across the startup landscape. Mitra reckons, “Once we emerge out of this situation, the mantra will be breakeven and companies that have a very definite road to profitability will thrive.” Startups whose path to profitability is very long and not well articulated will struggle.

For startups, which by their very nature cope with an uncertain future, Covid-19 presents the toughest test of their ability to survive.

Oasis of Confidence -Some startups have managed to raise funds even in these very challenging times
On April 7, online agritech startup DeHaat raised $12 million. The Series A funding round for a company that connects small farmers with suppliers of farm inputs and equipment was led by venture capital firm Sequoia Capital India, with co-investment from Dutch development bank FMO. A week earlier, online furniture subscription startup Furlenco closed a $10 million funding round.

The startup run by Kieraya Furnishing Solutions raised this capital via a mix of debt and equity funding. The equity portion was from venture capital firm Lightbox and Dabur’s Saket Burman, while it raised debt by issuing non-convertible debentures to ultra-high net worth individuals.

These two investments have come in the midst of a Covid-19 lockdown, when several startups are actually staring at an uncertain future. Ankur Pahwa, partner at EY India, says, “The reality is that capital is going to be more difficult to come by. Some of these deals would have been in discussions about a quarter earlier and were announced now.”

Even if these talks had started a couple of months ago, the fundraising speaks volumes about the investors’ confidence in the ventures in the face of severe disruption. Ajith Mohan Karimpana, CEO of Furlenco, says, “Any business that can show worthiness will get funded. Our fundraising was in the works for a quarter.”

Food delivery apps Swiggy and Zomato also attracted cheques of $5-10 million from a pool of investors. Karimpana says Furlenco’s monthly recurring revenue model makes it a lot more resilient than others.

Experts say ventures in food tech will see a rise in demand as people in lockdown will lead to increased home delivery orders. “Stickiness is high for some of these ventures,” adds Pahwa.

Besides, the crisis leads to more conscious spending by startups with a razorsharp focus on unit economics and profitable growth.

DeHaat, for example, plans to use its new funds to expand reach to more than one million farmers by 2021 from 210,000 now. Abhishek Mohan, VP, Sequoia Capital India, says, “Indian agriculture is on the brink of a massive transformation with ease of regulation, famers getting organised and increased smartphone penetration. DeHaat is leveraging these trends to build the next-gen product in agricultural supply chain.”

These ventures are indeed staying positive, looking ahead and clearly stand out in times when many peers are starring at a bleak future.