If the startup ecosystem can survive a pandemic, it can survive anything: Ruchira Shukla and Alok Goyal
This year has been tough for individuals, businesses, and entrepreneurs. And yet, many have not only survived but also thrived in this crisis.
On the sidelines of announcing the first cohort of the IFC and Stellaris Venture Partners programme, AI4Biz, focused on supporting early-stage AI-focused enterprise SaaS startups, Ruchira Shukla, Regional Lead, South Asia, Disruptive Technologies - Direct Equity and VC funds, IFC; and Alok Goyal Partner, Stellaris Venture Partners, speak about their lessons from 2020, and what they expect from startups in 2021.
Edited excerpts of the interview:
YourStory (YS): In a nutshell, tell us your key learnings from 2020, and what do you think 2021 will bring for startups?
Ruchira Shukla (RS): For me, the big message that came out this year for the startup ecosystem is that it is a very resilient and robust ecosystem. If it can survive a pandemic, it can survive anything.
The startups have all come out stronger. They have kept going even in the worst situations. It hasn’t mattered whether people have had to pitch to investors on a video call, or if they have had to relook at their business models, let go of important and talented people, and also keep the employees motivated.
It has been a tough year in every way possible. And what stands out is the resilience the startups have shown. In the initial days when COVID-19 hit, we were all prepared for the worst, and were looking to write off several companies. But when we look at how we have emerged, we realise we have come out with flying colours.
There are companies that have taken on new businesses they never thought they would be in, and they’ve been able to change the way solutions or services are offered. And investors still say they believe in India - both on a fund level and as limited partners (LP levels).
This tells you there is a strong promise in the Indian startup ecosystem, and we have proven that we can deliver results. In this backdrop, building a programme like AI4Biz has only been encouraging and positive.
Alok Goyal (AG): Resilience is a big takeaway for me. Apart from that, if you look at the macro-economic numbers, you realise that the economy has shrunk, but despite that, the startups have chugged ahead.
It shows the importance of technology in front and centre. For many sectors, COVID-19 has been a big tailwind. Like ecommerce, edtech, and SaaS to name a few. Overall, when you talk to the early-stage focussed funds, most would say their portfolios have come out stronger as a result.
YS: What will 2021 bring for startups?
RS: I feel there is nothing worse than fear itself. In March, we were surrounded by fear, and we survived those few months and survived well. Many companies have reached their February numbers now, so in 2021, even with the unknowns, I don’t think it will be worse than what we’ve seen.
The startups have figured solutions, they have managed cash flows, and know how to manage in a cash conservative mode. The year has taught some good lessons to startups, and people have learnt to survive in a crisis, which positions them for a great year ahead.
Also, tech adoption has seen at least a three-to-four years jump across all sectors. We are at this onset of a mega trend, and best investor returns are generated when you spot a trend at the right time.
This is the time for AI for enterprise tech, there is a wide breadth of solutions across sectors. There is great scope for economic value creation and development. There will be improved access and affordability of services to segments of the population where the services are not available.
AG: We are still going through a period where the future is unpredictable, but there are some bits that leaves us optimistic. If these companies have navigated the way they have in the last nine months, we believe that 2021 should only be more positive. Despite the lockdowns, people have found ways to get going and working.
However, one thing that makes me cautious about 2021, and it is more from a lack of visibility perspective, is the macroeconomic impact of the last nine months. The form and shape next few years will take is an unknown.
But, early-stage tech will see secular growth, and I am optimistic about it.
YS: What are your learnings from selecting startups for your new programme AI4Biz?
AG: Apart from having to choose from over 108 applications, we were impressed by the use of AI and tech that these companies displayed. Almost all had expertise and experience in building AI that is beyond just a namesake value.
What is interesting is that India hasn’t created that many infrastructure companies, these are softwares used by other developers. And yet, close to 20 percent companies were in that bucket. And in a new category like AI to have companies in the DevOps space is encouraging.
YS: What is the shift in startups and founding teams you have seen?
RS: I was pleasantly surprised by how smart the younger generation of founders and founding teams are. These founders bring a confluence of multiple skills that is hard to find in young people. They have a lot of technical depth and commercial prowess at the same time.
This means, apart from answering detailed questions on technology, the founders are able to cater to what the customers need, and they also know how to monetise, go-to-market etc. Everyone thinks practically about the customers problem, and have ambitions to sell their products within India and other markets.
Another important factor is the team chemistry, and we find that in young startups. Generally in young teams, this becomes a little choppy, but there is a comfort and ease of doing business.
AG: I would like to take a cricketing analogy. Prior to the Indian world cup win in 1983, if anyone would have said that India would win the world cup, they would have been termed as foolish. As until then we hadn’t even made it to the semi-finals. But 1983 gave precedence, and players soon started joining the team to win the World Cup.
When you have precedence, the perspectives shift. So in the startup ecosystem context, today we have that precedence. Today, SaaS entrepreneurs are bold, and have a belief that didn’t exist seven to eight years back.
Also, the bulk of the entrepreneurs today are either second time entrepreneurs or are a part of a successful startup. Their lens towards starting up, pace, go-to-market and consumers is different and more mature.
YS: The year has ended with Softbank’s exit on DoorDash. While this isn’t directly related to India, what do such large exits mean for the ecosystem? And does it impact the Indian ecosystem as well?
RS: These are very positive events. Irrespective of where the exit is, if the fund is well known globally and has actively invested in India, and shows a positive outcome, it helps the ecosystem significantly.
It makes entrepreneurs believe that this can happen to us. Today, the world is flat, it doesn’t matter if a large exit happened in India or elsewhere in the world, it happened in a model and business we understand. And we have parallels of the business in the country. It gives encouragement and makes people more determined in their own ways to deliver.
It also gives optimism to investors. A good exit is something most investors worry about and when these events happen, it sets a benchmark and belief that if we can grow our portfolios in the same way we can possibly achieve a similar result.
It is also a big positive for Softbank. These exits brings more capital into the country from them and others into the country. It is overall a positive thing.
AG: I think driving a startup is like driving into a tunnel. You don’t know how long it is going to be, what are the twists and turns, and we drive into it because we believe in the light at the end of the tunnel.
These IPOs are super encouraging. It just isn’t Softbank, even several late-stage investors from technology have seen exits. There is a belief that even the traditional investors are gravitating towards technology. This capital bodes well.
Also, I think that companies now want to remain private longer than they used to. When you look at Amazon’s IPO in 1997 versus companies that IPO today, the bar has shifted significantly. This means there is a need for more late-stage capital.
YS: What is your advice for startups and what do you hope for in 2021?
AG: For early-stage entrepreneurs, the time has never been better to be a tech entrepreneur from India. I am so encouraged by the resilience that the Indian entrepreneurial ecosystem has shown in 2020. I believe the worst is behind us, and there is a lot more fuel to help entrepreneurs realise their dreams. It is now important for entrepreneurs to follow their gut and follow their dreams.
RS: Go solve the tough problems. Entrepreneurs are ready and so is the market. There are team capabilities, market readiness, availability of capital, and cross country linkages. The perfect recipe is in place, you just need to put your force behind it and go solve the tougher problems.
Edited by Anju Narayanan