Revenue acceleration and funding have improved the cash availability with start-ups: Nasscom Survey

As India continues to take rapid strides towards digitization across sectors, Indian tech start-ups are now witnessing a gradual recovery journey.

National Association of Software and Services Companies (NASSCOM) today launched the findings of the Start-up Pulse survey II, titled “INDIAN TECH START-UPS – On the Road to Recovery.”

NASSCOM revisited its first tech startup pulse survey, conducted back in April – May 2020, to understand the current perspectives, what has changed and what the next 6 months look like for the tech start-up ecosystem in the country.

As per the NASSCOM Start-up Pulse Survey II findings, revenue acceleration and funding have improved the cash availability with start-ups. 43pc of tech start-ups have a runway for more than 6 months, compared to 8 percent in the earlier survey.

Covid-19 has accelerated digital adoption, and tech startups can leverage this opportunity with enterprise and SMB clients for product adoption. Greater focus on the shift to online has also created new business opportunities. There has been an increased interest from VCs and funding agencies to invest in seed-early stage start-ups.

Government initiatives such as Atmanirbhar Bharat, India’s digitalization, and a greater focus on sustainable business models are attracting VC interest for Indian tech start-ups. Almost 25pc of the surveyed start-ups have raised funds or found prospective investors compared to 7pc in the earlier survey. Sectors like Edtech, Healthtech, SaaS, SMB continue to attract investor interests.

Sharing her thoughts, Debjani Ghosh, President, NASSCOM, said, “The Indian start-up ecosystem has set a global benchmark in remained resilient during this disruptive year. Setting an example for many other industries worldwide to follow and learn from how Indian start-ups converted challenges into opportunities. A Large tech start-up pool, strong innovation focus, and entrepreneur’s zeal have been the ecosystem’s growth drivers. We are pleased with the way the ecosystem has been supportive of each other during these difficult times and hope that the industry remains its robust zeal to further contribute to reviving the economy.”

While the ecosystem continues to be cautious, it is increasingly looking at hiring talent with the right competencies. As per the findings of the survey, the hiring freeze at tech start-ups dropped by 20%. Jobs with the right skills continue to be in demand. Digital skills – data, AI, product management, cloud architects continue to be in high demand across the tech start-up ecosystem.

Demonstrating agility and resilience, tech start-ups continue to build sustainable operating models. Start-ups are adopting multiple short- and long-term strategies to tackle COVID impact. 72pc tech startups enhance their product offerings and invest in deep tech solutions that enable automation and analytics for their clients. Around 60-70pc tech start-ups are relooking their business models – expanding to newer verticals, building partnerships, and enhancing existing solutions.

COVID- 19 challenges have necessitated tactical and strategic shifts amongst tech start-ups leading to rapid diversification and focus on deep-tech as the ‘New Normal.’ 40pc of deep-tech focussed start-ups built AI-based solutions, over 60pc Agritech and Health-tech start-ups are focused on AI-based solutions.

There is likely to be a more judicious mix of revenue and operational efficiency in the future. Although pre-Covid funding levels may take longer, almost 50pc of tech start-ups expect to reach pre-Covid revenue levels in the next 6 months.

However, to ensure this road to recovery, continued support from the ecosystem is required. NASSCOM calls out 5 key imperatives for start-ups to sustain growth momentum: Optimize operational metrics; expand or pivot towards growing or upcoming verticals; ‘Vocal for local’ products and solutions and creating a larger social & economic impact; fostering trust-based partnerships with ecosystem players and customers; and lastly, enable and encourage digitization of impacted areas, e.g., Local stores, supply chain cogs.