As the world teeters on the brink of a dystopian nightmare triggered by the novel coronavirus pandemic, it is amply clear that startups, too, are now operating in a new normal. While most aspects of how things will pan out in this new world are still far from clear, the one piece of advice that seems to have become de jure is that, above all else, startups need to conserve cash. From blue-chip investors like Sequoia down to every seed fund and angel group, there is consensus consensus The Ken Covid-19’s impact on startups: Black Swan or something else? Read more —startups must ask themselves tough questions about cash runways and spend conservatively.
These suggestions are undoubtedly well-intentioned and prudent in theory, but actioning them is far more challenging. The Ken reached out to a number of Indian startup founders and investors to understand the challenges around funding and runways.
One common refrain from all these conversations is that this virus pandemic virus pandemic WHO Coronavirus disease (Covid-19) outbreak situation Read more is unlike anything that we’ve encountered before. Some people might be tempted to draw parallels to previous downturns like the dot-com bust in 2000 and the financial markets meltdown in 2009. But there is a broad consensus that this time, the pain is going to be felt far more widely and in a deeper manner than ever before. VCs are already telling startups to prepare for a long “nuclear winter”.
So how are investors advising their companies to prepare for this?
There is definitely no one-size-fits-all silver bullet. What makes sense for a consumer startup doesn’t make sense for a software as a service (SaaS) startup. Equally, what is applicable for a seed-stage startup is not relevant for a mature, heavily-funded startup.
So, let’s break it down into buckets and try to parse how Indian startups across the spectrum are thinking through the future.
For early-stage startups, the current environment can be firmly classified under the proverbial ‘best of times, worst of times’ category.
For one, despite public claims that they are open for business, investors across the board are simply not exploring new investments.
Angel investors The Ken spoke to have deprioritised new startup investments. Some angels are more seized with steering their own companies through these troubled waters. Others have decided that it is too risky to invest in startups right now.