2020 has been a year marred with challenges and losses to say the least. The onset of the global pandemic in early months of 2020 wreaked havoc on almost every business segment; the startup ecosystem was no exception. NAASCOM, the Indian trade body conducted a Startup Pulse Survey between April and May to gauge the immediate impact of COVID 19 and the resultant lockdown on Indian tech startups.

The picture presented by the survey was certainly not positive as most startups reportedly were severely affected by lockdown. Some of the major challenges were revenue losses, cash crunch, hiring freeze, drop in access to funds and customer demand.

It has been six months since the last SPR was launched and NAASCOM has launched the updated version of the report SPR 2 which recorded data between September and October, the results of which have been rather positive. The report has concluded that Indian tech start-ups are on a gradual road to recovery. Losses being faced by tech startups have come down by three times and growth has risen five times as compared to SPR1.

Startups have received more breathing space with three months runway and 20 percent rise in number of startups that have lifted the hiring freeze. Of all the industry segments, edtech, fintech and health tech have registered faster recovery. Over 50 percent of startups expect revenues to reach pre-COVID levels within the next six months.

This recovery has come as result of the swift intervention of these young firms. Many startups resorted cost optimization and prodyct diversification as short term strategies while they moved focus on deeptech, expanded to new verticals to remain sturdy in the long run.

The investment landscape has also come as a breather with a 3-4 times increase in startups that were able to raise funds as compared to April stats. The fastest recovery was witnessed in seed and early stage startups with a 27 percent recovery rate for each. With a flurry of startups entering the unicorn club, there were 22 acquisitions from April to August 2020, of which 19 were in the B2C space. However not all is as rosy; 48 percent of the respondents from the seed stage segment said that they were unable to raise funds and over 60 percent of B2C startups have been struggling to raise funds as well.

The report also concluded that startups experienced revenue acceleration improving the availability of cash and giving start-ups more breathing space. 43 percent of the respondents said they have more than 6 months runway as compared to a measly eight percent in SPR 1.

The key to sustaining growth in the time to come will be operational excellence and portfolio diversification. Startups must also undertake a collaborative approach and foster trust based partnerships with other players and customers alike. The landscape will be rewarding for ‘digital first’ models and ‘make in India’ firms.