COVID-19 impacts the Indian start-up ecosystem

The COVID-19 pandemic transcends boundaries and disrupts business operations in countries around the globe, one of them being India. In India, a country home to one of the largest start-up ecosystems of the world, enterprises and Business Development Services (BDS) providers alike are affected by the COVID-19 outbreak. Indeed, in a survey conducted by NASSCOM, the Indian National Association of Software and Services Industries, only 22 per cent of start-ups responded that they would have enough cash reserves to make it to the end of the year (Link). 

Since the Indian start-up ecosystem has been growing consistently in recent years, thus playing an increasingly important role in the Indian economy, it is pivotal to shed light on challenges start-ups and BDS providers face, opportunities they seize, and ways to manoeuvre through the crisis. This is not only relevant in regards to the economic importance of the start-up ecosystem, but also the social and environmental challenges that many start-ups, such as SEED supported eco-inclusive enterprises, tackle simultaneously. 

To assess the status quo and future outlook of what COVID-19 means for BDS providers in India, SEED India Hub invited BDS providers to take part in a virtual co-creation session. During the co-creation session that took place on 28th May 2020, BDS providers identified several challenges that both enterprises and BDS providers face due to COVID-19 and prototyped novel solutions addressing persistent challenges. 

Enterprises and BDS providers: challenges and solutions 

Due to the shutdown of business activities and declining consumption, enterprises and BDS providers face significant losses in revenues and dwindling capital reserves. Some enterprises and BDS providers cut costs on several ends, for example, travel-related costs, others adjust their business models and seek new funding opportunities. While start-ups shift their product line towards, for instance, the production of masks, Personal Protective Equipment kits (PPE kits), or robots to support social distancing, BDS providers are also adapting their services, programmes, and contents to COVID-19 needs. Yet, some of the participating BDS providers claimed that the uncertainty makes it difficult to define value propositions, restructure organisational activities, plan for projects, or validate start-ups. 

Moreover, enterprises and BDS providers face supply chain interruptions as well as travel and movement restrictions, which can have negative effects both on the sourcing as well as the distribution side. To give an example, in the case of enterprises, supply chain interruptions affect access to and prices of raw materials, which alter production conditions. Besides travel and movement restrictions influencing the ability to carry out field visits, logistical challenges BDS providers face include access to physical space, which under normal circumstances would be needed to conduct labs and training. Adapting to a “new normal”, programmes are moved online using digital tools for communication and project management. 

As the lockdown period resulted in a shift of business activities to the digital sphere, enterprises and BDS providers are in need to access tools and build digital capacities. Working from home and a changing work environment requires businesses to become more flexible and learn how to connect digitally. Even though the shift to mainly working online might seem challenging at first, an advantage of increased digitised work, a workshop participant stated, is the opportunity for cross-border cooperation and building new partnerships. However, information dissemination, especially through the government, does not yet reach everybody in need, which in India is addressed, for example, by setting up information kiosks, common services centres, and regional coalitions.

Solution prototyping for coping with COVID-19

Some solutions already exist, but difficulties posed by COVID-19 require BDS providers to think out of the box and innovate on an ongoing basis to tackle challenges faced by their own business and by the enterprises they work with. During the virtual co-creation session organised by SEED India Hub, BDS providers engaged in peer learning and worked together in breakout groups to prototype solutions aimed at coping with COVID-19. The solution prototypes suggest collaborating for lean start-up incubation, setting up information kiosks to empower communities in rural areas, easing financial distress of portfolio start-ups, and demystifying the process of proposal creation through matchmaking platforms. 

Prototype 1: Collaborating for lean start-up incubation

Addressing the challenge of a slowdown of money flowing into BDS organisations and the decrease in donor-funded projects, BDS organisations collaborate and move towards providing need-based services upon fee payment. Before an actual incubation programme, new business ideas are collected through a call for applications, including information on sectors in which current funding and investment is pooling. Targeted at businesses looking for support in developing a new product or service portfolio, the suggested programme brings together different elements of the partnering BDS providers adapted to the current needs of start-ups, including online support and, if needed, one-to-one support. Collaborating with other BDS providers and entrepreneurs, governments and mentors, this solution prototype can help BDS providers as well as enterprises to increase their enterprise resilience in one go.

 Prototype 2: Setting up information kiosks to empower communities in rural areas

Another solution prototype developed during the co-creation session addresses information asymmetries and suggests the creation of information kiosks as a gateway to empower communities in rural India. Targeted at rural entrepreneurs, information kiosks in rural areas can provide information on how to build capacity through digital means while supporting and empowering rural communities by raising awareness about setting up enterprises. Existing information kiosk prototypes and government centres are tapped for the creation of information kiosks in rural areas. After having identified and secured funding, cooperation with local stakeholders helps to identify partners for prototyping and replication, as well as content creation including updates, translation into local languages, infographics, and games.

Prototype 3: Easing financial distress of portfolio start-ups

Increasing revenue, securing funding, and cutting costs are some of the grand challenges posed by COVID-19 and dimensions that the third solution prototype touches upon. Relying on the use of existing digital tools and platforms, a novel programme by BDS providers aims at easing the financial distress of start-ups across sectors that can pivot and adopt new technologies or start-ups in existing portfolios. Contents include on the revenue side: repurposing the current situation and trying to tap new markets and markets created by the current situation. Furthermore, contents related to funding opportunities cover lost cost debt made available by the government, raising more capital with existing investors with pivot plan, customer funding based on pivot made, crowdfunding, or new grant opportunities. Content on revenue and funding is complemented by a section on cutting costs, which entails which costs to cut, such as travel costs or capital expenditures, renegotiations with employees, vendors, or customers, using the phydigital approach to cut costs, new financial analysis, or making use of technology to lower operating costs.

Prototype 4: Demystifying the process of proposal creation

The expectations of funding agencies and enterprises vary when it comes to applications for funding. Addressing the pressing need for funding in times of crisis and challenges such as the time needed to get articulation and budgeting right to create good proposals, this solution prototype aims to demystify the process of proposal creation. Specifically, it aims to empower enterprises to create proposals that match the funding agency’s criteria and enterprises’ needs. To do so, a matchmaking platform is created to bring together funding agencies and enterprises. Throughout the process, mentors are assigned to enterprises supporting them in their fund seeking endeavours, content-wise ranging from general to specific proposals. Targeted at enterprises, non-governmental organisations, and innovators, training opportunities can also focus on specific areas, such as proposal budgets. 

The co-creation session on enterprise resilience for BDS providers was organised by SEED India Hub. SEED India Hub is hosted by The Energy and Resources Institute (TERI) and funded by the International Climate Initiative (IKI) of the German Federal Ministry of the Environment, Nature Conservation and Nuclear Safety (BMU).   

SEED is supporting enterprise resilience in the context of COVID-19. Informed by interviews with 30 SEED supported enterprises, SEED has identified the most critical resilience factors relevant for eco-inclusive enterprises to sustain during and after the COVID-19 pandemic. Taking into account these critical resilience factors, SEED developed a toolkit on which virtual workshop series for eco-inclusive enterprises and BDS providers in Africa and Asia are based.