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Thousands of India’s startups face an existential crisis: Rajan Anandan, MD, Sequoia Capital India

New Delhi: Covid-19 is testing the business models of the best startups. Thousands of these ventures are trying to cope and stay in a position they have not planned at all. Some find ways to navigate the storm, but for many these Black Swan events, it could be Swan Song. In an email interaction, Rajan Anandan, managing director of Sequoia Capital India, discusses the new normal, what ventures should focus on, why technology, gaming, healthcare, and even robots can be successful and more. Edited excerpts:

Thousands of India’s startups face an existential crisis: Rajan Anandan, MD, Sequoia Capital India

What will be the new normal now?

The current crisis - humanitarian, healthcare, and economic  - is at a global scale and magnitude that have not seen in more than a hundred years. The level of uncertainty that we face in all aspects of life will last for some time. In India in particular, we have not yet reached the peak of the crisis. Therefore, it would be premature to draw conclusions about the "new normal" at this point.

But one thing we can hope for is that there will not be one thing. The prevalence and impact of COVID-19 causes changes in consumer behavior and consumer psychology, and a change in business dynamics, which will affect the startup scene in the coming years.

The recommended approach will be to develop and plan different scenarios about the development of the economy or industries and thus define the actions that founders and leaders must take in order to survive and ultimately thrive in different situations. 

What are your priorities at the current time?

Today, the most important thing is the safety and health of your family, your team, and yourself.

When it comes to your business, of course, the priority is to get out of the other side of this crisis. To do this, you must have a cash runway. COVID-19 has created challenges around funding and demand visibility to get to a positive unit economy must be reached very quickly. If you are in a situation where you are no longer interested in money at the bank, you have the flexibility to reimagine your business. This is an excellent site to be. And the founders who can take this time to innovate, fix the foundation, and really advance the market. Because when we get to the other side of Covid-19, the set of opportunities that we will have will be unprecedented. 

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What is the prognosis for the rest of the year?

The world has changed in many ways in the past few weeks, but the biggest changes are yet to come. There will be a lasting impact on many aspects of life, business, and governance in the post-nineteenth century.

Thousands of new Indian companies face an existential crisis. By the end of the year, thousands of our new companies will likely be out of business. But Indian businessmen are incredibly smart and innovative. We were very impressed by the number of founders who worked quickly to make sure they took care of their teams and took decisive steps to extend their cash supply.

Of course, there are companies that are counter-cyclical, and they are already experiencing significant growth under current market conditions. Online education, digital health, games, online food, food delivery, and collaborative tools are experiencing a significant opposite. But as I mentioned before, for many companies and sectors, survival will be the only goal this year.

Sequoia has done a few investments even in these times, like in DeHaat. What are some of the key metrics you will be watching while evaluating which venture to invest in?

We have always focused on partnering with bold founders looking for very large market opportunities and aiming to build lasting companies. This has not changed in the current environment.

Through Surge (Sequoia Capital's rapid expansion program for companies in the early stages), for example, we continue to focus on partnering with the best founders in the region in the very early stages.

In many industries in India, the entry has decreased to zero or nearly zero. Even after economies start to open up, there will likely be sectors that will take longer to recover. So, when thinking about our next group, it's very likely that we will tend to sectors that will be positively affected or that will recover over the next year, despite all the uncertainties.

What we'll keep looking for are exceptional teams eager to build in the long run.

What kind of startups do you see having higher than usual business activity and which ones do you see impacted negatively by Covid-19?

Edtech, Digital Health, Games, SaaS, SME tech, direct consumer brands, and agtech are the sectors we have focused on and we will continue to focus on in the future. The products and services that help digitize SMEs have become a very exciting space, especially given the massive economic role that SMEs play in India and Southeast Asia. Khatabook, which was our first Surge group, is the first among many interesting SMEs that India will establish in the coming years.

Some of these sectors, especially education technology, digital health, gaming, and SaaS focused on teleworking, are witnessing a major new turning point and all of these segments will reach a new normal level of demand and growth.

This could also be a turning point for robots. India did not really have a role to play in the field of robotics, but we could have a window given the demand tsunami that is likely to arise for automation in all industries.

Offline industries that depend on physical proximity or focus on travel will be negatively affected for a long time, and we are already seeing that happen. International travel, hospitality, offline retail, and offline events will not be the same again for long. Startups in these industries will need to find ways to adapt to the post-COVID-19 world.

Source: Economic Times

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