The year 2020 has been a bumpy ride for India’s nascent tech startups. Estimates suggest that enterprise customers have reduced IT spending by 8% in 2020 due to reduced cash flows and the risks of an impending economic slowdown. However, tech startups are likely to register a stronger comeback with enterprise customers projected to increase IT spending by 6% in 2021. Three brackets of tech startups are emerging based on the demand trajectories: technologies that have recorded a decline in demand, technologies that have recorded a short-term rise in demand, and finally technologies that have retained status quo. Tech startups that have lived up to the promise of ensuring business continuity, workforce collaboration, and effective remote working for their enterprise customers have thrived. These tech startups will be integral to enabling the steady-state growth of India’s knowledge economy and its rise through the global innovation index’s ranks through sustained digital transformation.
Tech-Startups That Have Recorded A Decline In Demand And Revenues
Some tech startups faced strong headwinds in the first quarter of the year, and it has been a road downhill. 90% of India’s tech startups reported a decline in revenues, with 30-40% having to pause their operations temporarily, and 70% of them reported having a runway of fewer than three months. During the pandemic, enterprises have pivoted towards outcome-based digital transformation initiatives and have put outlay-based projects on the backburner. Technologies that have experienced a dip in demand are data centre systems, enterprise software, devices, ITeS, and communication services. Tech startups offering business transformation solutions, business process re-engineering, and modernisation of legacy applications and systems have been at the receiving end of reduced expenditure by enterprise customers. Tech startups that had exposure to enterprise customers operating in high-physical contact environments have also recorded a dip in revenues. Majorly affected startup models include hospitality, ride-sharing, hotels, travel, and tourism.
Tech-Startups That Achieved Supernormal Growth by Enabling OPEX Control
The pandemic has seen a surge in demand for technology-enabled solutions that allow enterprises to reduce their exposure to financial and health risks. Consequently, tech startups that have provided or pivoted their offerings to transition their customers from fixed costs to variable costs or reduce their exposure to health risks through remote working and workforce collaboration have registered robust growth. Technologies that have experienced a rise in demand during the pandemic include desktop as a service (DaaS), infrastructure as a service (IaaS), a virtual private network (VPN), and cloud computing platforms. Cloud-hosted applications offer scalability and allow enterprises to control operating expenses through SaaS models and metered billing. Tech startups in the education, healthcare, and public utility sub-sectors have grown significantly through this transient phase.
Tech-Startups That Have Sustained Growth By Enabling the New Normal
The pandemic has seen some tech startups maintain their growth. These tech startups were able to take advantage of the push from offline to online. The pandemic has reduced planning horizons, compressed innovation-to-market cycle times, spot risks in real-time, and brought forth the importance of data-driven decision making. Tech startups that offer business applications based on artificial intelligence, machine learning, and robotic process automation have put their enterprise customers on the trajectory of deploying business continuity management systems. They are de-risking their customers’ business models over the long term and are growing steadily. This tech startup category is rising in sectors like manufacturing, supply chain, B2B e-commerce, logistics, BFSI, and grocery retail.
Digital Transformation and Collaboration will remain a dominant theme
Coming out of the pandemic, businesses will be keen to explore ways to ensure business continuity. Business continuity is an overarching theme for sustainability and is integral to realising 6 UN sustainable development goals. There will be a significant swing towards “technology-centric business models”. Tech startups that will offer solutions to enterprises to become asset-light and de-leverage their balance sheets will find new business opportunities in the spaces of clean water and sanitization, affordable and clean energy, industry, innovation, and infrastructure, sustainable cities and communities. Also, tech startups that allow enterprises to become location-agnostic and collaborate in contactless environments will create value by providing a social safety net while enabling them to penetrate new geographies, markets, and product categories. Verticals that are deemed as “essential” will require the highest levels of technology enablement. Tech startups that will ensure seamless digital transformation will provide the best insurance against disruptions, both for their customers and themselves.