India’s Startup Ecosystem Recovering Faster Than Expected: Report

India's startup ecosystem is recovering faster than expected as a new report on Wednesday said that investor interest is quickly getting back to pre-Covid levels while 75 per cent of start-ups are gradually, but steadily, recovering.

This is despite the fact that the Covid-19 jolted the India startup ecosystem across multiple dimensions and the impact was severe during the lockdown period from March to June 2020, said the report by TiE Delhi-NCR, part of the global non-profit TiE network, and Zinnov, a global management, and strategy consulting firm.

There was a dip in overall funding by 50 per cent during the lockdown as compared to pre-Covid levels.

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Around 40per cent of start-ups were negatively impacted, and 15 per cent of Indian startups were forced to discontinue operations due to Covid-19, said the report.

However, as the economy opened, the pace of recovery — both in demand and in investor sentiment — has been faster than expected.

Around 40per cent of start-ups were negatively impacted, and 15 per cent of Indian startups were forced to discontinue operations due to Covid-19, said the report. Unsplash

Around 30 per cent of startups have pivoted to newer markets for alternative revenue streams, while more than 55 per cent of startups are focusing on profitability and reducing cash burn.

Further, deal activity — both in terms of total investments and the number of unique funded startups — has recovered to pre-Covid levels during the quarter that ended in September 2020, said titled, "COVID-19 and the Antifragility of Indian Startup Ecosystem".

In Q3, the Indian startup ecosystem showed positive signs of recovery –funding reverting to 98 per cent of Q1 (pre-Covid) levels, investor sentiments becoming positive, ticket sizes increasing and number of startups raising their first investment round also reverting to Q1 levels, showed the findings.

Interestingly, seven Indian startups have already reached unicorn status in 2020, with four of these during covid-19.

India is on track to have a total of eight unicorns this year — almost the same number of additions as in 2019, said the report.

Additionally, the startup ecosystem is expected to have 7-7.5 Lakhs direct jobs. Unsplash

"Although COVID-19 has been a major setback for the ecosystem, we believe that the changes that the pandemic has brought on will make our ecosystem much stronger, across every dimension. India is on a path to have 100 unicorns by 2025," Rajan Anandan, President, TiE Delhi-NCR, said in a statement.

Additionally, the startup ecosystem is expected to have 7-7.5 Lakhs direct jobs and 26-28 lakhs indirect jobs in total, by the end of 2020, further cementing its recovery.

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"Despite the trying times, and the death of many startups, the ecosystem has played a key role in employment generation and is expected to create ~15-16 Lakhs direct jobs by 2025," said Pari Natarajan, CEO, Zinnov.

"There is clear evidence that India's future is about technology, policy, innovation, and entrepreneurship." (IANS)