Over 50% tech startups expect revenue to pick up in six months: Nasscom

Tech start-ups in India that were battered by the pandemic are on a gradual recovery path, recording reduction in losses, improved cash runway and access to funding, according to Nasscom’s new Startup Pulse 2 survey.

Nasscom defines tech start-ups as active technology product/platform companies incepted in 2015 or later.

With over 50% startups expecting revenues to reach pre-covid levels within six months, the outlook for the sector is cautiously optimistic. While seed and early stage start-ups in edtech, fintech and healthtech are witnessing a faster recovery, B2B startups are also seeing an uptick in the revenues.

Revenue acceleration and funding has improved the cash availability with start-ups. Around 43% of tech startups have a runway for more than six months compared to 8% in the survey done in April-May.

Fund-raising too has seen an uptick in the last three months. The July- September quarter saw around $1211 million of fund-raising compared to $482 million in April-June quarter.

Almost 25% of the surveyed start-ups have been able to raise funds or find prospective investors as compared to 7% in the earlier survey, with edtech, healthtech and software as a Service (SaaS) firms continuing to attract investor interests.

The covid-19 crisis has accelerated digital adoption and tech startups can leverage this opportunity with enterprise and small business clients for product adoption, Nasscom said, adding that, greater focus on the shift to online has also created new business opportunities. There has been an increased interest from venture capitalists (VCs) and funding agencies to invest in seed-early-stage start-ups. Government initiatives such as Atmanirbhar Bharat, digitalisation of India, a greater focus on sustainable business models is attracting VC interest for Indian tech start-ups.

“The Indian start-up ecosystem has set a global benchmark in remained resilient during this disruptive year. Setting an example for many other industries across the globe to follow and learn from how Indian start-ups converted challenges into opportunities. A large tech start-ups pool, strong innovation focus and entrepreneur’s zeal have been the growth drivers of this ecosystem” said Debjani Ghosh, President, Nasscom.

More tech startups have also begun hiring as 20% more start-ups lifted hiring freeze. Jobs with digital skills – data, AI, product management, cloud architects continue to be in high demand across the tech start-up ecosystem. According to the report, 10,000 direct jobs were added by tech startups during the April- September period. While hiring has improved across sectors, it is no surprise that sectors like edtech are on a hiring spree.

However, covid challenges still persist and start-ups are adopting multiple short- and long-term strategies to tackle its impact. About 72% tech startups are enhancing their product offerings and investing in deep tech solutions that enable automation and analytics for their clients while 60-70% of tech start-ups are relooking at their business models – expanding to newer verticals, building partnerships and enhancing existing solutions.

The pandemic has also necessitated tactical and strategic shifts amongst tech start-ups leading to rapid diversification and focus on deep-tech using Artificial Intelligence (AI) and IoT-based solutions as the ‘New Normal’. There is likely to be a more judicious mix of revenue and operational efficiency going forward.

However, to ensure this road to recovery, continued support from the ecosystem is required. Nasscom suggests five key imperatives for start-ups to sustain growth momentum. These include optimizing operational metrics, pivoting towards growing or upcoming verticals, ‘Vocal for local’ products and solutions and encouraging digital first models.