Demonetization – The rise and shine era of startups

A lot of startups have flourished to bridge the gaps between the existing arrangements. Let’s take a very simple example. Consider a web based B2B startup in the grocery space that cater to the needs of retailers, who experience gaps in the existing arrangements and are looking at facilities beyond just stock procurement. The startup came into existence to sell the products to the retailers in a more organized way than other distributors. While on an average, such startup gets an average of 100 orders every day, but almost 60-70 of orders might have got cancelled or postponed post the announcement. The retailers were not having enough cash to pay for the orders and that’s why they decided either to shut the shops or cancel/postpone their orders. 

The good news is that the smart startups are wondering and making ways of managing the same number of orders in his business for the next two to three months. Startups have shared that though this time is very challenging, but they see a ray of hope in the coming times. Known for bringing innovations in the current business practices, startups share that the need of the hour is to look for innovative ways to sustain themselves for the next two to six to eight months. One step in this direction can be as simple as increasing their number of people using their platform. For the above case, if right now the startup owner has say 200 retailers he is catering to, he will just have to increase the number of retailers he gets the business from. Moreover, startups have been focusing on using technology for easing every process. This move by Modi will bring such startups in the limelight as they will have more acceptances by retailers. Cutting down the cash payments, retailers will gradually have to use mobile wallets and deal in a more structured way through our mobile apps.

The move by Modi is very beneficial for the startups, particularly the ones that are organizing traditionally cash driven segments like grocery and fresh-produce distribution. Startup are born with the idea making the unorganized sector organized and this initiative will encourage 100 percent formal trades in India. Even if a minimum of 40-50 percent of consumers shift to online transactions, there will be a huge amount of data available for the marketer. Startups like every other segment, might suffer a cash flow issue in the beginning, but there will be no fund-flow issue. The up-side is that with everyone being forced to open bank accounts, a farmer to an entrepreneur will become eligible for loans.

The startups in the agriculture sector look vulnerable because of its highly unorganized nature and heavy dependence on informal workforce. The startups in this space might struggle more initially to operate under the new restrictions imposed on cash withdrawals. Experts say that a lot of companies that deal with farmers are taking steps in this direction. The good news for them is that the middle men will disappear in all transactions with the farmers. We can also expect more of smart-phone penetration in rural India in the future. The investors should be really delighted as it will lead to more compliance and governance in all companies across all sectors.

It completely depends on the startups on how they are going to deal with the situation. The ones, those catch up early will gain advantages while some will take time depending on the sector they deal in. Users who are cautious of using credit cards and digital money will see numerous inconveniences and the businesses, especially those who deal in immediate cash, will suffer the most.

Startups will majorly be benefited. Though, the scheme will take a time to be implemented properly and achieve the balance it is looking for. With the demonetization in place, people are set to deposit their money into banks. When banks will receive money, they will be able to lend more. And every wannabe entrepreneur knows how much finances matter. So, with the increased deposits, the bank will be able to lend, and startups will be able to get loans in a comparatively easy manner. The people and business with white money will find it easier to transact and digital money will gain reasonable attention. We are hopeful that startups will find a positive opening for themselves in this chaos and make the most out of it. 

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