New Delhi, Jul 23 (PTI) Startups are focussing on improving their unit economics amid COVID-19 pandemic that will help improve the underlying health of ecosystem, and drive more funds by 2022, Sequoia Capital India MD Rajan Anandan said on Thursday.
Speaking at the Global Fintech Fest 2020, Anandan said there are going to be some "material" changes in the Indian startup ecosystem as the pandemic and resultant lockdown have forced many startups to shut down.
"...there going to be some material changes in our ecosystem...India has over 40,000 startups, only about 10 per cent have raised venture capital funding, and of the startups that have raised venture capital funding, 90 per cent are deeply unprofitable. Of the ones that haven't raised, only 40 per cent are profitable," he said.
Anandan added that while many startups have closed shop, Indian startups have materially improved their underlying unit economics in the last four months and many companies will move towards profitability.
"By end of 2021, I think the underlying health of the Indian startup ecosystem is going to be 10X better than what it is today and as a result, I think Indian startups will generally require less capital but whatever capital they need, they'll be able to get," he said.
The former Google executive said funding activity would probably be slower next year amid the uncertainty.
"But I think by 2022, India is going to see much more capital than we've ever seen, because we're actually going to have very high quality companies," he said.
With businesses seeing significant impact due to COVID-19 pandemic, many startups have frozen hiring, slashed salaries and laid off people. A number of tech-enabled businesses including Ola, Uber, Swiggy, Zomato, BookMyShow and ShareChat had laid off hundreds of staff during the last few months.
IT industry body Nasscom had conducted an e-survey, with participation from over 250 startups during April to study the impact of COVID-19 pandemic, and understand the measures needed to minimise the impact.
In the survey, about 90 per cent startups said they are facing a decline in revenues, and about 30-40 per cent had indicated temporarily halting their operations or in the process of closing down.
About 70 per cent startups surveyed had said they have a cash runway of fewer than three months, the most affected being the early stage and mid-stage startups.
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