Are Indian start-ups geared for the Coronavirus pandemic?

Are Indian start-ups geared for the Coronavirus pandemic?

by Dr Param Shah

While the virus is predicted to cause economic slowdown and huge losses, some Indian start-ups are seeing this as an opportunity for new products and ideas.

Highlights:

  • The impact of Coronavirus is seen across several supply chains and different industries such as luxury, food, tourism, entertainment, automobiles, clothing, and technology.
  • Cancellation of major trade fairs globally is causing worries to B2B start-ups who rely heavily on trade fairs for lead generation.
  • While these setbacks dampen spirits in the ecosystem, some Indian start-ups are seeing this as an opportunity.

The Coronavirus that is rampaging across the entire country of China, and at this stage, the world, is having a damaging impact on the global economy and businesses. To date, this pandemic has affected 110 countries with total reported cases standing at over a hundred thousand people and has taken the lives of close to 4,000 people. China is said to be an indispensable part of the global businesses and the ripple effect might be rough and lasting.

Impact of Coronavirus on the global economy

COVID-19 has rattled the global economy. It is being expected that this virus outbreak may slow down global economic growth by 0.2-0.3 per cent in the year 2020. The economic fallout could include recessions in the US, Europe and Japan, the slowest growth on record in China, and a total of $2.7 trillion in lost output – equivalent to the entire GDP of the UK.

Its effects are now evident on supply chains, along with shutting down the access towards a lucrative consumer market. Even the global stock markets have become extremely volatile and the world is now embracing for an unwanted and unplanned economic slowdown. The impact of this crisis is observed across several supply chains and different industries such as luxury, food, tourism, entertainment, automobiles, clothing, and technology.

Impact on Indian start-ups

While the established and the large organisations are well prepared to handle the financial effects of the coronavirus, it is the small and medium-scaled enterprises, as well as the start-ups who might face some significant challenges.

Though India is yet at early stages with the spread of the virus, the impact is clearly visible amongst the Indian start-ups. Oyo is set to let go about 5,000 people in the wake of the coronavirus outbreak. This is almost 17 per cent of its workforce. Sequoia Capital sent a letter to the founders of its portfolio companies warning that the coronavirus was the ‘black swan of 2020’ and that they should ‘brace themselves for turbulence’ by managing their cash well and also prepare plans for supply chain disruptions. With fears of market downturns similar to 2001 and 2009, Sequoia Capital also warned that they could have a harder time fundraising.

Cancellation of major trade fairs globally is causing worries to B2B start-ups who rely heavily on trade fairs for lead generation. They are estimating that the effects of the slowdown will be visible from Q3 of 2020.

Co-working spaces are also focusing on preventive care to stop infections. Many tech start-ups have already announced work-from-home plans for employees.

While these setbacks dampen spirits in the ecosystem, some Indian start-ups are seeing this as an opportunity. With the spread of the virus, there has been an acute shortage of surgical masks. Delhi based start-up Nanoclean grabbed this as an opportunity to launch its new product, Nasomask. Since the launch of the new product, the company has done 10 times its usual business. The Nasomask is a N95/FFP2 grade facemask and is specifically designed to protect against contagious viruses.

It is still too early to gauge the complete impact of the outbreak of coronavirus on businesses. However, several companies have accepted the fact that the virus is affecting their business in varying degrees. Once the infection is controlled from spreading, it would be an uphill task for businesses to restructure and bring back the momentum.

Dr Param Shah is Director – UK of the Federation of Indian Chambers of Commerce & Industry (FICCI).

Disclaimer: The views expressed herein constitute the sole prerogative of the author. They neither imply nor suggest the orientation, views, current thinking or position of FICCI. FICCI is not responsible for the accuracy of any of the information supplied by the author.

About the Author: Dr Param Shah