Startup Innovation is a must in COVID times

The startup ecosystem is facing its biggest challenge yet.

It’s the survival of the fittest.

It is a historical fact that any crisis spurs innovation. However, the COVID-19 phenomena is unparalleled and extraordinary and needs to looked upon with a different lens. While the pandemic has swept across with debilitating impact across most industries and sectors, it has had a sledgehammer effect on the startups and small businesses. As a result, ~40 percent of startups in India have faced temporarily closure due to the pandemic, and this may become permanent in many cases. The situation is likely to be accentuated by estimates that ~70 percent of startups have less than three months of cash runway.

However, there is a silver lining in every crisis with the potential to turn adversity into opportunity. Taking a step back, let us analyse the fact that ~90% of Indian startups fail in any case. The most important reason for the failure of Indian startups is the lack of innovation coupled with the lack of a widespread support ecosystem. There is a dearth of new technologies, top-notch technical talent, investment in R&D or unique business models.

So, despite the distress, the pandemic has provided a once-in-a-lifetime and a forced opportunity to startups to understand the newly emerging market and consumer demands and pivot quickly to meet the same through change and innovation, and building systems and processes to scale with new business models and products. With business continuity and growth at tremendous risk, leveraging innovation will be the game-changer. As a result, many startups today are innovating and changing business plans to cater to new market demands arising out of the COVID-19 pandemic.

PIVOT - the new catchword in the Startup ecosystem

As per a Nasscom 2020 survey, 54 percent of the startups are now looking at new opportunities and business models to stay afloat, survive the current crisis and stabilize. Growth is only an after-thought right now. Pivoting is not necessarily about reinventing the business model. It makes business sense to pivot in the same or similar categories and possibly get into product extensions. A couple of days back, I was talking to Vikram Khinwasara, co-founder of ‘The Yellow Straw’, a fresh juice startup from Kolkata and he excitedly explained to me how a product extension from fresh juice to raw fruits worked for him in the COVID crisis.

Let’s take the example of some other well-known startups. ‘Cure.fit’ shut down its core business of gyms & health clinics across India and focused on digital yoga classes which generated substantial revenues. Similarly, ‘Licious’ with internal delivery manpower for meat supply switched to delivery by logistics providers like Yulu and Shadowfox resulting in a revival of business.

Then there are startups which have actually incubated in COVID times, with COVID-led solutions. E.g. IIT Madras incubated startup, ‘Muse Wearables’ is into a method for coating textiles with nanoparticles-based antimicrobial agents that can ‘inactivate’ Corona Virus on contact. There are numerous other COVID-led solutions being launched by startups like contactless parking, air sanitisation of centrally air-conditioned malls, hygiene analytics, suspect tracing etc.

The COVID phenomena may be a long-term one, but even if it isn’t, it has forever changed the way startups will do business in the future. A recent survey by McKinsey and Company of more than 200 cross-sector companies, aptly summarizes the mood when more than 90 percent of the respondents say that they expect the fallout from COVID-19 to fundamentally change the way business is conducted. In the short-term, the startups will have to ensure liquidity and slow-down of the burn rate while in the long-run, pivoting to the all-new sunrise verticals like healthcare, and emerging tech like AI, IoT, Cloud, videoconferencing, gaming and OTT platforms, streaming, online education, grocery delivery and e-pharmacies, seems to be a viable survival option due to unsustainable unit economics and high cash burn.

While resilience and adaptive measures to survive and thrive is important for startups, innovation will be a critical factor in building capacities, improving outcomes and tackling business vulnerabilities such as revenue stress, downbeat demand, reduced workforce, and a market downturn.

Atul Raja, Executive Vice President - Marketing, Wadhwani Foundation