We would be living in a fool’s paradise if we fail to acknowledge the reality that the Indian economy has in reality been hit tough by the ongoing COVID-19 pandemic. The impact of this crisis has had a rippling impact and India has witnessed, as has been observed across the globe, a fall in cross-border trade, rise in poverty and unemployment, and disruptions in provide chains such as a contraction in outputs. As per the World Bank’s Global Economic Prospects report released on January 5, 2021, there has been a contraction of India’s GDP by 9.6 per cent in the fiscal year 2020/21. However, as a silver lining, it is also noted that India’s GDP is anticipated to develop at 5.4 per cent in the fiscal year 2021/22 and 5.2 per cent in fiscal 2022/23.
Despite incredibly difficult financial circumstances due to COVID-19, venture capital investments in India rose throughout the third quarter of 2020, with a main concentrate on hugely relevant corporations and industries in such occasions such as the intensely competitive meals and grocery delivery sector (wherein Flipkart raised USD 1.3 billion), customer goods (packaged essentials, private and healthcare goods and meals processing), pharmaceuticals as properly as sub-sectors like health-related provide and services, biotech, agricultural goods, edtech, chemical substances, and e-commerce.
There appeared to be an upswing in the positive sentiments as soon as the initial tidal wave of doom and gloom due to COVID-19 had subsided. In reality in July of 2020, Sequoia Capital raised $1.35 billion for its new fund focused on investing in commence-ups in India, along with Southeast Asia. Similarly, Google announced a $10 billion fund to support accelerate India’s transition to a digital economy. According to the IVCA-EY month-to-month PE/VC roundup of 2020, private equity/ venture capital investments worth $41.4 billion across 852 bargains and exits worth $4.9 billion across 129 bargains with open marketplace exits accounting for 47 per cent of all bargains by worth have been recorded.
While private equity and venture capital investors entered uncharted waters and attempted to cope with an unprecedented and hugely dynamic predicament as it was unfolding in 2020, concentrate on operational excellence, portfolio diversification, collaborative strategy, encouraging digital-1st models have been amongst the prime priorities for most commence-ups as investors have been on the look-out for powerful balance sheets, steady money flows, decrease debt levels, and reliable management teams, as investment considerations. One could say that as a present from above, the consequent financial, monetary, and organization fluctuations due to COVID-19 encouraged commence-ups to adopt a cautious and vigilant strategy in the wake of the crisis though finalizing their organization plans, revenues milestones, and organization targets, specifically if the breach of these targets could lead to adverse consequences beneath industrial and investment agreements. Founders have been advised to be cognizant of any previous agreed functionality obligations in the investment documents and proactively inform the investors of the influence on the metrics measuring the functionality obligations (which a lot of investors have been prepared to take into consideration positively).
Also Read: Twitter’s desi option Koo gets $4.1M from 3one4 Capital, Accel, Kalaari, Blume Ventures, others
In 2020, we observed the deal construct going via a huge adjust as physical meetings have been replaced by virtual interactions, and the significance of due diligence was magnified for closing prospective bargains. From a deal-producing standpoint, there have been many components investors emphasized upon though evaluating/ implementing bargains, with a stricter evaluation of specific constructs such as material adverse impact, force majeure or identified circumstances subsequent, as properly as particular consideration of the influence of COVID-19 on the functionality of the enterprise, particular warranties on pandemic events and the like.
While investment activity appeared to be in a slump in the early months of 2020, deal levels ultimately picked up with investors tapping into possibilities emerging from the COVID-19 crisis itself. Although the pandemic triggered a short-term setback in private equity/venture capital investment with a consequent fluctuation in the GDP of India realignment of priorities, drawing renewed focus to sectors like meals and grocery delivery, education, healthcare, and pharmaceuticals, such as health-related study and on line sale and delivery of pharmaceuticals helped some investors sail via these troubled waters.
Also Read: How Experience And Leisure Startups Adapting the New Normal in 2021
In the present uncertain and complicated globe that we inhabit, commence-ups and investors alike, have to have to adopt an open mindset, adapt swiftly to altering scenarios, concentrate on crisis management, and create many contingency plans. Economic recovery from this crisis would also rely on the government’s response to the predicament and the execution of the reforms it has announced to tackle the crisis. Overall, the private equity/venture capital business is nevertheless a pillar of strength and anticipated to provide superior momentum to the Indian economy in innovation, creation of new jobs, mentoring of entrepreneurs, and constructing of superior infrastructure. Within the commence-up ecosystem, stakeholders are taking many initiatives for commence-ups with upcoming grants, incubation applications, and so on, and more than 50 per cent of commence-ups count on revenues to attain pre-COVID levels inside 6 months and we are prepared to place all our chips on this quantity. Having mentioned that, we’d like to finish this piece with a line from the renowned song Que Sera Sera (Whatever will be, will be) and only hope for the ideal for the commence-up ecosystem and the PE/VC sector in the days to come.