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Investors ask startups to innovate, eye opportunities in digital, healthtech

VCs are also examining investment opportunities in online media, healthcare, biotech, cyber security, cleantech, logitech, gaming, e-commerce, BPO, deep tech and software

Bengaluru: Even as they grapple with uncertainty, startups must continue to review business strategies and introduce new products and services that could generate revenue in the near term, say investors.

Apart from stressing on conserving cash at present, venture capital firms are also advising their portfolio firms to focus on innovation. Sudhir Sethi, founder and chairman of VC firm Chiratae Ventures, said that his firm is encouraging startups to look at new business models, new revenue models, new products and services. "More than 50% of our portfolio companies have introduced new products and new services in the last 4-6 weeks," he said.

Padmaja Ruparel, founding partner at IAN Fund said that they are advising startups to remain engaged with customers, review business strategies and to focus on technology development.

Orios Venture Partners, an early stage VC fund, is guiding portfolio firms on how to prioritise projects that may provide immediate benefits. The firm's managing partner, Anup Jain pointed out that sectors such as grocery, milk, delivery of medicines have been positively impacted in the last few weeks.

Orios has advised its startups to focus on projects that may be key to getting revenues, such as essentials, Internet media and gaming.

VCs are also examining investment opportunities in online media, healthcare, biotech, cyber security, cleantech, logitech, gaming, e-commerce, BPO, deep tech and software. The pandemic and the resulting lockdown, however, are likely to have affected valuations.

Ankur Pahwa, partner and national leader - e-commerce and consumer internet, EY India, said the current environment is "providing fertile grounds" for startups in the sectors mentioned above.

"The ongoing health crisis has accelerated both digital transformation in the sectors, as well as digital adoption by consumers, providing the necessary fuel for further innovation. Considering how some of these startups are helping us cope and paving the way in these extreme scenarios, investors will continue to be excited about investing in the space," he said.

"Any segment or sector with increased digital interface across their value chain will be able to quickly bounce back," Pahwa added.

Sethi believes that digital products and services, BPO, deep tech, healthtech and software are likely to perform well in the near term. While his firm is focused on portfolio support at present, he added, there will be new deals too.

IAN's Ruparel said that they continue to look at early stage investment opportunities, starting from 25 lakh, and consider online, healthcare, biotech, cyber security, cleantech and logitech converging sectors as attractive, at this point.

However, she added, investors will become choosy and startups will find it more difficult to raise money. "This could result in small compromises in valuation, but we believe that good businesses will raise money at fair valuations," she added.

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