Tech startups recovering gradually: Nasscom

While the Indian economy is still reeling from the Coronavirus-induced lockdown in the early summer, tech startups are witnessing a gradual road to recovery backed by rise in digital adoption across sectors. Rise in revenue and funding has improved the cash availability with startups, reveals a recent study by the technology industry trade body Nasscom, adding that 43% of tech startups have a runway for more than six months, compared to 8% in its earlier survey.

With increased digital adoption across sectors during the pandemic, tech startups have managed to leverage the opportunity with its enterprise and SMB clients for product adoption. Greater focus on the shift to online has also created new business opportunities. According to the Nasscom report, there has been an increased interest from venture capitalists (VCs) and funding agencies to invest in seed-to-early stage startups. Government initiatives, such as Atmanirbhar Bharat and digitalisation of India, a greater focus on sustainable business models is attracting VC interest for Indian tech startups.

The report highlighted that about 25% of the surveyed startups have been able to raise funds or find prospective investors as compared to 7% in the earlier survey. Sectors such as edtech, healthtech, SaaS, SMB continue to attract investor interests.

Nasscom revisited its first tech startup survey conducted in April-May this year to understand the current market perspectives and the trend for the next six months for the tech startup ecosystem in the country.

“The Indian startup ecosystem has set a global benchmark and has remained resilient during this disruptive year. Setting an example for many other industries across the globe to follow and learn from how Indian startups converted challenges into opportunities,” said Debjani Ghosh, president, Nasscom, adding that a large tech startup pool, strong innovation focus, and entrepreneur’s zeal have been the growth drivers of the ecosystem.

However, the ecosystem continues to be cautious. The report added that it is increasingly looking at hiring talent with the right competencies. As per the findings of the survey, hiring freeze at tech startups dropped by 20%. Jobs with the right skills continue to be in demand. Digital skills such as data, AI, product management, and cloud architects continue to be in high demand across the tech startup ecosystem.

To tackle the impact of Covid-19, startups have adopted to multiple short-and long-term strategies. According to the study 72% tech startups are enhancing their product offerings and investing in deep tech solutions that enable automation and analytics for their clients. Around 60%-70% of tech startups are relooking at their business models: expanding to newer verticals, building partnerships and enhancing existing solutions.

There is likely to be a more judicious mix of revenue and operational efficiency going forward. Although pre-Covid funding levels may take longer, almost 50% of tech startups expect to reach pre-Covid revenue levels in the next six months, the report added.