The year 2020 has been a challenging year; it has brought about a fundamental shift for the investor and Indian startup ecosystem. The outbreak of the COVID-19 pandemic has changed the dynamics of operations for the startups. While 2020 was all about chaos and introspection, experts predict a more stable 2021 for India’s startup ecosystem.
India is undeniably growing, and so is the startup scenario in India. There have been a lot of new and encouraging stories over the last few years on the Indian startup scene, be it educational startups like Byju’s and Unacademy or payment services like PhonePe, or even an online food delivery platform Swiggy, all have become a part of day-to-day needs of the country.
The country’s startup ecosystem has matured, and here we take a look at what’s in store for the Indian startup ecosystem in 2021.
The year 2020 began on a positive note for the Indian startup ecosystem-growing rapidly on the back of remarkable 2019. However, the coronavirus pandemic shook the ecosystem, especially during the lockdown period. With lockdown being lifted and markets coming back to normal, experts suggest that recovery signs are visible. In 2020, nine new startups joined the unicorn club.
As the wheels of the economy are turning better, here are a few things that the Indian Startup ecosystem should expect in 2021.
A Paradigm Shift In Consumer Behavior
COVID-19 has brought about a significant change in consumer behavior. The pandemic has propelled online direct-to-consumer businesses such as EdTech and HealthTech into mainstream consumption within a short period-of-time. The surge of internet users in tier 2 and 3 cities has expanded the consumer reach beyond the metropolis. The innovations made in logistics and supply chain management have resulted in unfathomable penetration into unexplored markets enabling brands to widen their footprints. As a result, a strong online presence of brands and an Omni-channel approach will witness growing interest from users and investors alike.
Investors Are Becoming Increasingly Cautious
Investors are becoming more cautious about the unreasonable excitement in startup valuations. The focus is shifting from spending inconsiderately to drive the top line to build more sustainable business models. Hence, the unit economics and business model’s sturdiness will prove to be the main factors in the future in shaping valuations. Thus, the sectors that focused more on gross merchandise value without gross margin or any real contribution will get wedged.
Growing Competition And Consolidation In Organized Retail
Startups in the retail space will have to face increasing competition from the larger organizations that are entering this space over acquisitions and strategic collaborations. This may unnerve a few startups that have pioneered tech-enabled business models in this segment. Thus, eCommerce startups with a large dependence on their retail networks may witness consolidation in the coming year.
Startups Will Have To Drive The Digital Adoption In The Country
Many steps are being taken by the government, including the easing of listing norms by SEBI for the startups. Even RBI has made a move, although emerging, to include startups under PSL (Priority Sector Lending) norms. All this is being done since there is a realization that startups will be the real drivers of digital adoption. With the ecosystem moving towards maturity, many startups are also looking to list on the public exchange that would help in bringing the liquidity. At the same time, retail investors will get more accessibility to new-age companies.
The Hybrid Work Model Is Here To Stay
While the initial adoption of remote working was challenging for many companies, but now the corporate world is beginning to embrace this new way of working. This shift has brought about opportunities for startups to leverage technologies and bring about products that can increase remote working efficiency. Efforts in promoting AI-based solutions, reimaging workplaces, and upskilling employees have already started. All this will enable new businesses to become agile and open a wider pool of talent irrespective of physical boundaries.
2021 Will See A More Robust Indian Startup Ecosystem
Despite the pandemic, the Indian startup ecosystem has been able to hold a firm grip, and many have converted crises into opportunities. The Indian startup ecosystem in the coming New Year and as we advance will be all about innovation and technology. The HealthTech, FinTech, and EdTech will continue to rise and shine. The startup scenario looks promising in 2021 with investors’ rising confidence, technological advancements, and promising schemes by the government to encourage the startup ecosystem.
