'Thousands of startups face an existential crisis'

NEW DELHI: Covid-19 is testing the business models of the best of startups. Thousands of these ventures are trying to cope and survive in a situation they never planned for. Some are finding ways to navigate the storm, but for many this Black Swan event could be their Swan Song. In an e-mail interaction, Rajan Anandan, managing director, Sequoia Capital India, discusses the new normal, what startups should focus on, why ventures in edtech, gaming, healthcare and even robotics could succeed and more. Edited excerpts:What will be the new normal now?The current crisis – humanitarian, healthcare and economic - is at a global scale and magnitude that hasn’t been seen in over a hundred years. And the level of uncertainty we are facing in all aspects of life will continue for some time. In India, especially, we are yet to hit the peak of the crisis. So to draw any conclusions about the ‘new normal’ at this stage, will be premature.But one thing we can expect is nothing will be quite the same. The spread and impact of COVID-19 is bringing about changes in consumer behaviour and consumer psychology - and a change in business dynamics - that will impact the startup landscape for years to come. A recommended approach, will be to develop and plan for different scenarios around how the economy or industries will evolve - and therefore determine what actions founders and leaders need to take to survive, and eventually thrive in different situations.What are your priorities at the current time?At present, the most important thing is the safety and health of your family, your team and yourself.When it comes to your business, of course the priority is to come out on the other side of this crisis. And to do that, you need to have cash runway. Covid-19 has created challenges around funding and demand visibility and there’s a necessity to get to positive unit economics very quickly.If you are in a position where you are no longer worried about money in the bank, then you have the flexibility to reimagine your business. Which is a great position to be in. And founders who can, should take this time to innovate, fix the foundation and really pull ahead of the market. Because when we arrive on the other side of Covid-19, the set of opportunities we will have will be truly unprecedented.What is the prognosis for the rest of the year?The world has changed in so many ways over the past weeks -- but the biggest changes are yet to come. There will be permanent impact across many aspects of life, business and governance in the post Covid-19 era.Thousands of India’s startups are facing an existential crisis. And by the end the year, it’s likely that many thousands of our startups will cease to be in business. But Indian entrepreneurs are incredibly agile and innovative. We have been deeply impressed with how many of our founders have acted quickly to ensure they take care of their teams and taken decisive actions to extend their cash runway.Of course there are businesses that are counter cyclical – and are actually seeing significant growth in current market conditions. Online education, digital health, gaming, online groceries, food delivery and collaboration tools are seeing significant tailwind. But as I mentioned before, for many businesses and sectors, survival will be the only goal this year.Sequoia has done a few investments even in these times, like in DeHaat. What are some of the key metrics you will be watching while evaluating which venture to invest in?We’ve always been focused on partnering with daring founders who are going after very large market opportunities and aim to build enduring companies. That hasn't changed in the current environment.Through Surge (Sequoia Capital’s program for rapid scale up of early stage ventures), for example, we continue to focus on partnering with the absolute best founders in the region at very early stages.Across many industries in India, revenues are down to zero or close to zero. And even after economies start opening up there will be sectors that will likely take a longer time to recover. So as we think about our next cohort, we will very likely tilt towards sectors that will either be positively impacted or those that will recover over the next year, despite all the uncertainties.What we will continue to look for are extraordinary teams who are passionate about building for the long-term.What kind of startups do you see having higher than usual business activity and which ones do you see impacted negatively by Covid-19?Edtech, digital health, gaming, SaaS, SME tech, direct-to-consumer brands and agtech are sectors that we have focused on and will continue to focus on in the future. Products and services which help to digitize SMEs has become a very interesting space – especially given the massive economic role played by SMEs in India and Southeast Asia. Khatabook which was in our first Surge cohort is the first of many super interesting SME tech companies India will create over the coming yearsSome of these segments - especially edtech, digital health, gaming and SaaS focused on remote work - are seeing a major new inflection point and all of these segments will reach a new normal of demand and growth.This will also likely be the tipping point for robotics. India has not really had a role to play in robotics, but we could have a window given the tsunami of demand that will likely arise for automation in every industry.Industries that are largely offline, dependent on physical proximity or focused on travel, are all going to be adversely affected for a long time – and we are already seeing that happening. International travel, hospitality, offline retail, offline events are not going to be the same again for a long time. Startups in these types of industries will all need to find ways to adapt to the post Covid-19 world.Will digitisation as a trend increase - for payments, shopping etc?Consumer adoption of digital and digitalization of businesses will accelerate significantly as a result of Covid-19. We will see a step change increase in digital adoption across many industries.Consumer behaviour changes that could’ve taken five to ten years have been accelerated to two months. This is especially evident in the uptick we are seeing in hyper-growth segments like online learning and digital health.On the B2B side, digital products that can reduce costs and drive efficiency, enable remote work, improve collaboration and enable all things contactless, will become essential for every business in the world. And each of these areas will lead to a large number of new Indian startups.

from Economic Times https://ift.tt/36JYycY