Given that startups are a key driver of India’s economic growth and innovations, startup founders must find newborn opportunities in challenges to ensure growth, both for themselves and the economy.
By Monica Mehta
While the Covid-19 pandemic has had a profound effect on the entire economy, one segment of the economy that is particularly at a higher risk is startups. According to a Nasscom report, startups created an estimated 60,000 direct jobs and 1.3 lakh to 1.8 lakh indirect jobs in 2019. However, the pandemic has caused startups to shut shop or get to the brink of business closure for any of these several reasons: low to no demand in certain industries, operational restrictions, rapidly altered consumer behaviour and increased digital demands. Given that startups are a key driver of India’s economic growth and innovations, startup founders must find newborn opportunities in challenges to ensure growth, both for themselves and the economy.
To ensure steady growth, startups will need to adapt to new business and operating models, because consumer habits are highly dynamic today — what and how they buy (i.e., buying more online, wanting to make fewer/shorter trips, etc). There are several ways in which businesses can maintain efficiency and remain resilient while adapting their business models to meet newer customer demands.
Digital-first focused business models
The first step for startups attempting to change their business models is accelerating their shift towards digital-first models. This involves re-evaluating customer needs and customer discovery to ensure that customer needs in the Covid-19 era are met. For example, a restaurant needs to ensure that sanitized food, contactless delivery and online ordering are made available for their customers. At the same time, however, startups will have to adapt their business model to remain sustainable. For a restaurant, this could mean shifting into shared kitchen space to reduce rental as well as labour costs. Such well thought through and timely changes in business models will extend the runway for startups during a time when visibility on raising a new round of funding is low. For startups, bootstrapping was applicable even prior to Covid-19, but it is even more relevant for them today.
Secondly, startup founders will need to start making data-driven decisions to understand how best to operate their businesses. Due to the enormous shift in the economy, new business models need to be developed. Using forecasting and planning models to guide operational and business decisions will ensure resilience in the short-term and commercial success in the long term. For example, a software startup will need to use data to understand whether firms are still in need of its current offering of software products and if so, when the demand for the same will pick up. If not, the startup will quickly have to come up with more pertinent software that could address the current and ever-changing customer needs.
Investing in new technology
Additionally, while most startups might have limited capital, it is essential at this time to invest in new technology. With the world shifting to a digital mode of communication and purchasing, all startups must ensure that they have the right technology tools to run their business before it becomes obsolete. For restaurants, for example, this can mean having a digital marketing strategy, being able to provide a restaurant experience at home, etc.
Leading with innovation
Overall, this is a difficult time for startups that already have limited capital and are not always financially stable. However, this is also a time for businesses to innovate and ensure they are keeping up with the consumer demands as well as staying viable. Rather than viewing it as a fight for startups to survive, one could view it as an opportunity for startups to grow and adapt to a new normal in the business world. Given this new normal, economies and global value chains might get permanently altered. Startups have the opportunity to lead through innovation and resilience rather than waiting for the crisis to get the better of them.
The author, Monica Mehta, is Executive Vice President, National Entrepreneurship Network (NEN) at Wadhwani Foundation.
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