The Coronavirus has impacted the lives of people all around the globe. May it be on personal, social or work level – everything has been affected by COVID-19. Apart from the individual costs, the pandemic has shaken financial markets and left the world on the brink of an economic downturn, which promises to be the worst in the past centuries. There’s no playbook for businesses to tackle this economic crisis. Both corporates and startups have to reinvent and relocate supply chains, financial resources and the way of organizing sales and client meetings.
According to a report by the German Startups Association about the impact of the corona crisis on Germany, the recession will especially threaten the existence of startups. Startups are affected by the crisis, as financial reserves are rarely available and planned rounds of investments are even more challenging to conduct. The report clearly states that the problem is severe for startups and above all, demands rapid and decisive action by the government.
For India which is one of the most populous countries in the world and with a huge number still living below poverty lines, the impacts of Corona can be devastating. Prime minister Narendra Modi recently announced a nationwide total lockdown until 14th April 2020 which is likely to be extended till the end of April, forcing 1.3 billion Indians to stay home to combat COVID-19. It is likely that investments in Indian startups will fall drastically, despite 30 Indian startups having raised USD 3 billion just in February 2020 – nearly three times more than a year ago. While available funding will decrease, Indian startups are also seeing opportunities arising from the virus. A lot of startups are reaching out to the government with ideas and suggestions to reduce the economic and social costs of COVID-19. The prime minister even invited startups to share their ideas to fight coronavirus (COVID 19 Solution Challenge) with a reward of up to Rs 100,000 (approximately EUR 1200).
Additionally, a number of new platforms on which founders and startup ecosystem stakeholders can reach out to experts to find answers or solutions to problems and questions arising in doing business in the times of the Corona crises (e.g. #StartupsVsCovid19, YourStory COVID-19 Resource Centre for Startups and SMBs) have emerged. Jointly in cooperation with the All India Council for Technical Education (AICTE), MHRD Innovation Cell, Forge and InnovatioCuris have launched the “Fight Corona IDEAthon”. In a two-day hackathon, entrepreneurs and innovators worked together online to scout for accessible and affordable technological solutions to contain the rapid spread of the infection. Out of over 5000 applications, 20 were shortlisted for advisory, media and piloting support by Sachin Gaur (Founder of InnovatioCuris). One of the major challenges startups were facing during the hackathon and in general since the virus has spread rapidly relate to difficulties in supply chains and logistics. “We saw that during the hackathon, people had limited resources to build a physical product. I see that a lot of startups who are not equipped to work online – because of their own or their customers behaviour – will be impacted by the virus,” says Sachin Gaur.
Flo Oberhofer, a German founder in India is positive about the way the Indian startup ecosystem has responded to the situation. “The Indian startup ecosystem has one significant advantage over western startup ecosystems. They have frugality and “jugaad” in their blood. India is a country of uncertainty, so generally Indian startups have a structure that is relatively lean and has little overhead/fixed costs,” he says.
However, even if Indian startups in general are used to a level of uncertainty, this pandemic is causing an uncertainty for the overall business community and will impact consumer behaviour startups are also depending on. Thus, several questions arise: “Is the flexibility and agility of Indian startups paying off in times like these? Could this even be an opportunity for startups, for example in sectors such as e-commerce, edtech or healthtech given the lockdown, closed schools and a desperate search for medication?” “Video conferencing solutions, augmented reality and collaboration solutions are having their seminal moment,” says Sachin Gaur. Flo Oberhofer agrees and emphasizes that fast and flexible Indian founders are pivoting to serve the current situation to fight COVID-19. “Software startups have gotten into grocery/fruit/vegetable delivery, clothing start-ups started sewing masks and natural soap manufacturers are suddenly producing hand sanitizers,” Flo highlights.
Overall, the Indian startup ecosystem has copped well with the situation given that many startups have a focus on tech. “Remote has been a way of work for us for a long time, because we are a small but global team,” says Aruna Schwarz, CEO of Stelea Technologies. In these times Aruna focuses on her existing customers and supports the government decision to tackle the bigger problem – the humanitarian crisis first. “Start-ups who are meant to survive will do,” she further adds.
However, there is no doubt that the crisis affects both start-ups and corporates. The German startup jetlite that provides holistic and scientifically proven solutions to reduce jet lag and increase the overall passenger well-being, focusing on Human Centric Lightening, recently partnered with Vistara, a joint venture between the Tata Group and Singapore Airlines. It was envisioned that starting in March 2020 with the unveiling of the first of six new wide-body aircraft, jetlite’s Human Centric Lighting would fly on Vistara’s Boeing 787-9Dreamliner fleet in order to enhance passenger well-being and reduce the effects of jet lag. With the Corona virus reaching its peak in many countries, borders have been closed and international air traffic has almost come to a halt. The effects on the airline industry are already visible. Several airlines have asked for government support to overcome the crisis. While jetlite was able to implement its solution jointly with Vistara before the crisis, the future of many airlines is uncertain which may affect startups working in this sector in the long run.
The question of how business will overcome the crisis remains. According to McKinsey, businesses have to act now across five stages. Firstly, resolve the current situation by deciding what to do when. Secondly, build resilience and think of how to achieve economic and social sustainability after the crises. Thirdly, return to business as usual and reactivate the business after the crises. Fourthly, reimagine and reinvent the business model and lastly reform the business after the crisis. “We need a decentralised world to be more resilient,” says Sachin Gaur. “Governments can coordinate this effort with the power of ideas from startups to support local communities to help themselves. It is time that governments mature and take proactive measures rather than being paralysed in the wake of a crisis,” he concludes.