Start-ups emerge out of Covid shadow, expand runway: Nasscom survey

The study finds 43% enterprises have enough cash to sustain for over six months as compared to 8% in May; most expect to hit pre-Covid level over next six months

From a severe cash crunch situation in the early phase of the pandemic in April-May when they were hardly left with three months of working capital, start-ups in the country 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, 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.

The factors that are helping the sector to bounce back, the report said, include rapid adoption of digital solutions in the country as business shift to online medium. Besides, government-led initiatives such as Atmanirbhar Bharat, Digitalisation of India, and a greater focus on sustainable business models is attracting VC interest for Indian tech start-ups.

A similar survey conducted by the industry body in May had said that majority of the startups were running low on ammunition with just eight per cent of them saying their working capital would help them to last for six months. The per cent of such startups has now gone up to 43 per cent. The sector, the present survey found, is also starting to see a renewed interest by investors attracting over $1.7 billion in the past six months with most getting sealed in the last three months.

Almost a quarter of the start-ups who participated in the survey said that they have been able to raise funds or find prospective investors as compared to just 7 per cent reported during the May survey. Especially, startups in Edech, Healthtech and software as a service (SaaS) continue to attract investor interests.

“The start-up ecosystem in the country has set a global benchmark in remained resilient during this disruptive year,” said Debjani Ghosh, president, Nasscom. “We are pleased with the way the ecosystem has been supportive of each other during these difficult times and hope that the industry remains its robust zeal to further contribute to reviving the economy.”

The survey however found that most of the start-ups continue to remain cautious as far as hiring of employees are concerned though many have lifted the hiring freeze imposed during the lockdown phase. Jobs with specific skillsets such as big data and analytics, AI, product management, cloud architects continue to be in high demand across the tech start-up ecosystem.

ROAD TO RECOVERY

• 4 start-ups became unicorns despite the pandemic

• Over 5X growth in percentage of startups seeing 6+months runway as compared to April-May period

• A fifth of the tech startups lift hiring freezes, go for selective hiring

• Startups in areas like Edtech, Fintech and Healthtech see faster recovery

• Product diversification is the new normal for start-ups