Investors shelve startup plans this year as Covid-19 rages

The number of startups founded this year more than halved across sectors in a sharp reminder of the impact of the coronavirus pandemic on India’s potential entrepreneurs.

The sweeping uncertainties of 2020 made would-be entrepreneurs apprehensive about starting their ventures as both demand and funding remained unpredictable, according to analysts and investors.

The numbers are disappointing. Only 27 startups were founded in agritech this year, compared with 97 in 2019. Similarly, there were only 93 technology startups—well below the 332 last year, according to data sourced from Tracxn. Likewise, 170 retail startups were founded in 2020 compared with 498 in 2019.

“It is true that fewer startups have been founded in 2020 versus 2019. The reason is very apparent. The first three months after the covid outbreak was not conducive to economic activity and funding activity. Most VCs were busy protecting their existing folios and figuring out the way ahead,” said Anup Jain, managing partner, Orios Venture Partners //descriptive/.

The disruption drove investors to focus on their existing portfolios rather than committing to new deals.

“Established startups with a track record continued to get equity funds from existing investors at tepid valuations…but there was scepticism about backing new ventures in an uncertain market accentuated with lockdowns and supply-chain restrictions,” said Ankur Bansal, co-founder and director, BlackSoil Capital, a venture debt fund.

Seed and early-stage funding, considered crucial capital for budding startups, plummeted in the March quarter. The number of seed-stage deals had fallen by at least 29% sequentially in the March quarter, while early-stage deals (series A and B) dipped by around 30% quarter-on-quarter, according to Tracxn.

However, overall economic activity picked up globally July onwards, and Indian startups, too, saw an uptick in funding and new ventures.

For instance, //in zzz/, GoWork’s //descriptor/ former CEO, Sudeep Singh, launched MPowered to help property owners convert real estate liabilities into income-generating assets. Singh also raised $21 million in a pre-series A round from a group of US-based high net worth individuals.

“We used this period to focus on tech development and worked on various proprietary software to help large companies transition to the new office mandates and become covid-19 //safety/ compliant,” said Singh, who is now the CEO of MPowered.

Singh said office leasing is back on track post the lockdown with some companies already closing large deals and preparing to go all-out next year. “We are expecting to do 3X business next year with managed office spaces, warehouses and commercial leasing being the top three segments for us,” he said.

With schools and colleges closed this year, edtech took a huge lead as investors remained bullish on the opportunity to create large learning and community platforms. These included platforms focusing on online tutoring like Teachmint that launched in May and raised $3.5 million in its seed round, to platforms focused on creative arts and sports like FrontRow that launched in November, and raised a seed round of $3.2 million.

Launched in April, homegrown social video app MitronTV raised ₹2 crore as a part of its seed round, the investment coming soon after the government banned 59 Chinese apps, including ByteDance-owned TikTok.

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