E-commerce to edtech, start-up firms bloom amid Covid-19 pandemic gloom

Massive beneficiary of the covid situation has been the startups which are growing rapidly on the back of digital adoption, which is witnessing an acceleration worth multiple years in just few months

The Covid-19 crisis has catapulted a new breed of startups to stardom which are lapping up the opportunities thrown by the pandemic and disrupting old business models with their innovations. The massive beneficiary of the covid situation has been the startups and tech companies. They are growing rapidly on the back of digital adoption which is witnessing an acceleration worth multiple years in just a few months. 

These include sectors such as e-commerce, edtech, logistics, foodtech and fintech. The other areas include healthcare, gaming and software-as-a-service. These sectors are witnessing an exponential rise in demand for services and the trend is expected to continue in the next few years as well, according to analysts. Schooling, learning, banking, doctor appointments, workouts to shopping and buying food and grocery have all gone online as people work and learn from home.

“It's been a phenomenal year for startups in India especially in sunrise sectors which witnessed increased traction and adoption,” said Ankur Pahwa, partner and national leader, e-commerce and consumer internet at EY India. “As demonetisation was an inflection (point) for the fintech, the pandemic has provided an opportunity for aggressive expansion and increased use cases across segments. As startups become the mainstay for consumers and increased network effects, we will see them attract bigger cheques and increased valuation,” said Pahwa.

In fact, this year so far, 11 companies in India became unicorns or start-ups valued at  $1 billion or more,  while 9 firms became unicorns in 2019. Despite the pandemic, this year the young ventures so far have still been able to attract a total of $10.6 billion of venture capital investments, according to data from Venture Intelligence. This is lower than the 2019's total investment of $12.5 billion and $10.9 billion in 2018. So far the total number of venture capital deals stand at 648 compared to 833 deals in 2019 and 731 deals in 2018.

“Startups that achieved unicorn status during the year saw a hockey stick curve growth and proved resilient to the disruption,” said Pahwa of EY.

Three such companies which thrived in the area of edtech were Byju’s, Unacademy and Vedantu. This is because much of the country’s $180-billion education sector is going online to adapt to the new reality. 

The Covid-19 pandemic helped Byju’s to become a decacorn (a company valued at over $10 billion). Less than few months after it raised $500 million in a financing round in September, Byju's is learnt to have closed $200 million in a fresh round of funding. This has lifted the firm’s valuation to $12 billion - almost $1 billion higher when compared with the previous round. 

Byju’s has seen tremendous growth this year. Since the lockdown, it has added over 25 million new students on its platform. Today, the app has over 70 million registered students and 4.5 million annual paid subscriptions. The firm had almost doubled its revenue from Rs 1,430 crore to Rs 2,800 crore in FY20. It is now inching towards the $1-billion revenue milestone.

Not far behind is Facebook-backed Unacademy which this year became the most valued edtech start-up after Byju’s. It raised an undisclosed funding in November from SoftBank and Tiger Global at $2 billion valuation. The fund-raise follows a round in September when it raised $150 million, led by SoftBank Vision Fund 2. At that time, Unacademy's valuation had trebled to $1.45 billion in just six months. 

Unacademy is mainly dominant in the area of exam preparation space. But it is now gearing up to take on Byju’s by tapping the K-12 education space and teaching coding to children. The firm, founded in 2015 (and on YouTube in 2010), has become one of the largest learning platforms, with over 47,000 educators teaching in over 14 Indian languages, and learners spread across 5,000 cities. Over 150,000 live classes are conducted on the platform each month. The collective watch time across platforms is over 2 billion minutes per month.

Such has been the demand for education services that tech entrepreneurs have been able to woo investors online to raise the capital. Sometime this year, when the whole country was under lockdown, Vamsi Krishna, the co-founder and chief executive of Vedantu, which provides live tutoring online, negotiated with investors on video conferencing platform Zoom to raise funding. He was successful in closing a $100 million funding deal led by top-notch US-based investment firm Coatue, with participation from existing investors. With this round, the firm’s valuation jumped to $600 million.

Experts said with Covid, education has gone through a rapid shift, almost more than any other industry and it isn’t going back. Next year is going to be crucial for edtech firms to prove that remote learning can work. 

Not only that, one of the biggest changes from 2020 has been the rise of cashless payments. There is a rapid rise in new online payment platforms whose businesses are created in the cloud. Despite most of PhonePe’s employees working remotely, the digital payment startup has been able to turn the Covid-19 pandemic challenge into an opportunity. PhonePe recently crossed the 250-million registered user milestone, with over 100 million monthly active users generating nearly 1 billion digital payment transactions in October alone. It is targeting at crossing 500-million registered users by December 2022. “As they say, ‘never waste a good crisis’,” said Sameer Nigam, founder and chief executive officer at PhonePe. “We've seen phenomenal organic uptake.”

After a lot of hardships, the firm recently has been successful at signing a deal to raise $700 million in primary capital at a post-money valuation of $5.5 billion from existing Flipkart investors, including Tiger Global, led by Walmart, the world’s largest retailer. It is deepening its penetration into financial services, whose size could touch $340 billion in the next few years. The firm plans to tap into opportunities ranging from banking, insurance and wealth management to lending. This year, PhonePe launched 20 categories in the area of insurance and wealth management alone. The firm even emerged as the largest platform for buying 'digital gold' with over 35 per cent market share.

“The kind of growth that we've seen in last six months is more than a couple of years put together,” said Harshil Mathur, chief executive and co-founder of newly formed fintech unicorn Razorpay.

After raising funding of $100 million this year from Singapore’s sovereign wealth fund GIC and Sequoia Capital, Razorpay is launching a string of products ranging from insurance to vernacular language support. These are aimed at empowering the next phase of digital growth for small businesses in India. The firm plans to achieve $50 billion TPV (total payment volume) by the end of 2021. 

Covid-19 has also accelerated the journey of foodtech companies to profitability. After initial hiccups, food delivery firm Zomato is rapidly coming out of Covid-19 shadows. December 2020 is expected to be the highest ever GMV (gross merchandise value) month in Zomato’s history. It now clocking about 25 per cent higher GMV than its previous peaks in February 2020. “The tailwinds for food delivery businesses are clearly visible, and we believe that the growth of the sector will accelerate post-vaccine,” said Zomato co-founder and CEO Deepinder Goyal recently. Zomato recently closed a $660 million primary financing round at a post-money valuation of $3.9 billion. The firm is also now focusing on launching its nutrition business.

From the trends experts are seeing, 60 per cent to 80 per cent of all internet traffic will be video, images, and audio in 2021. That number is accelerating into the future. One such startup tapping this opportunity is Glance, the world’s leading lock-screen platform owned by Bengaluru-based mobile ad network InMobi Group. Glance recently raised $145 million from tech giant Google and Silicon Valley billionaire Peter Thiel’s Mithril Capital. The new financing round has helped the 18-month-old Glance to become the fastest company to reach unicorn status.

Some young ventures  have also pivoted their businesses through repurposing their innovations, knowledge and people to new needs that have emerged. These range from, face masks, shields, vaccines and affordable diagnostic kits to tech-enabled hand-held devices and robots — in the battle against the virus.

One such company is Invento Robotics, that has developed  Astra, a self-driving robot and which means ‘weapon’ in Sanskrit. It uses ultraviolet light (UVC)-based disinfection equipment to kill the coronavirus. Several hospitals in India such as Yatharth in Noida and Apollo in Bengaluru have been using the robot to disinfect their wards and protect frontline health workers.

The tables have turned for many startups this year. There was a severe cash crunch situation in the early phase of the pandemic in April-May for them, when they were hardly left with three months of working capital. These ventures in the country have now seen significant improvement in this metric with many claiming that they have now more than doubled their runway, a Nasscom report capturing the current state of the sector, recently said. The report which was done based on a survey of over 270 technology startups said, almost half of the respondents believe that they are expecting to hit the pre-Covid level in terms of business over the next six months.