A noticeable improvement in India’s infrastructure, is one of the three things driving capital inflows, has enabled startups to create more value and scale up their businesses quicker, says Vaibhav Agrawal, partner Light Speed Venture Partners. He acknowledged the fact that there is a lot of capital flowing into India at this moment.
Agrawal told CNBC’s Street Signs Asia that many companies are also benefiting from an improved cost of production per unit of goods. “We are seeing higher order values, for example, in e-commerce, higher frequency of ordering, for example, in food commerce companies. That is just giving a lot of confidence to investors worldwide.”
However, Agrawal noted that the big criticism of India’s capital markets has been around exists and liquidity, especially for late-stage investors. He explained that Zomato’s successful listing in July helped ease some of the fears investors have about the startups and their ability to go public. “Zomato is getting followed by about 20-odd companies that will go public, so, hopefully, they will do well. All of this is creating just the ‘perfect storm’ that’s allowing everyone to take more risks, from early stage investors to late stage,” Agrawal said.
Digitization cushioned startups
Moreover, majority startups and businesses in India cushioned themselves to the impact of COVID-19 pandemic by accelerating digitization, which was supported by increasing consumer acceptance and adoption of digital services and products.
WeForum has highlighted the growth of digitally-enabled hyper-local business models such as Meesho and PayNearby. The complexity of the challenges posed by the pandemic has spurred multi-sector initiatives that have seen government, startups, universities and civil society collaborating. It has to be emphasized that the focus of the Indian government’s support package for the MSME sector during the pandemic was Atmanirbhar Bharat (self-reliant India). The initiative provided incentives and policies to facilitate the localization of specific industries such as electronics manufacturing and toy manufacturing.
Moreover, it gave further impetus to the National Policy on Electronics. Recent initiatives such as the ESDM incubation centre in Hubli and the Super Fab-Lab in Kochi support the localization of the electronics supply chain through developing hardware startups. Furthermore, global multinationals are also supporting this localization trend by setting up new manufacturing clusters and platforms for Indian small businesses. Experts believe such initiatives could help create more reliable supply chains, boost local employment and reduce the carbon footprint related to transporting goods and reduce India’s electronic imports.
The healthy lifestyle choices of Indian entrepreneurs during the pandemic played an important role, pointing to the entrepreneurs’ personal resilience and their attention to self-care to maintain this resilience.