Amid startup boom, second COVID-19 wave plays spoilsport
Indian startups have been on an unprecedented tear, growing and raising money like never before, even prompting questions about a valuation bubble, but the second wave of the coronavirus infections now threatens to derail some of that momentum.
A number of startups in Mumbai, Bengaluru, Hyderabad and Delhi have seen dozens of employees test positive for the virus, and in many cases, key leaders and even founders have been down with the virus. In some of these cases, employees in offline-heavy sectors such as e-commerce and lending have contracted the virus while on duty, and are now scrambling for oxygen cylinders, remdesivir and hospital beds.
For example, Akshay Chaturvedi, founder and CEO of education firm Leverage Edu, spent most of the last couple of days helping out his team members, running from pillar to post to secure beds and oxygen in New Delhi, although his business – of sending students abroad for higher education, is actually peaking as infections fall and vaccinations rise in the United States and Canada.
“Given we are in the study abroad business, the second wave here hasn’t impacted us much, but as the leadership, my focus is definitely on taking care of the team and their families first. That’s where the mental bandwidth is,” he says.
It is also telling that in at least six startups, Moneycontrol found that 15-25 people tested positive in a few days’ time, rather than just the odd employee. Companies are isolating and quarantining entire teams.
For instance at direct to consumer startup Mosaic Wellness, about 25 people tested positive for COVID-19 in mid-March. The company decided to put some of the infected employees in a hotel. In their case, some employees of the Mumbai-based startup were new to the city and just about settling down.
“This virus impacts your mental health as much if not more, especially if you’re new to a city. Your neighbours aren’t helping, your flatmates may shun you during quarantine. So putting up a few people in a hotel was the natural option,” said Revant Bhate, co-founder and CEO of Mosaic.
In the case of gold loans startup Rupeek, it had to shut its Hyderabad branch after over a dozen people including its regional head tested positive. Over the last month and a half, it has been opening and closing its branches cyclically as multiple branches saw breakouts of cases.
“Despite all precautions we’ve had several people test positive across the last couple of months. Offices have to be shut on and off. It’s very difficult, but because we are in a lot of cities, growth in some cities is covering up for a shortfall in others,” said Sumit Maniyar, founder and CEO of Rupeek.
India saw a record 3.14 lakh cases on April 22, with 2,104 deaths, with many states in lockdown or actively considering one.
All the companies Moneycontrol spoke to for this story said their employees recovered in a week or two, and none have serious long term effects so far.
Until last month, many startups had teams such as sales and marketing work from the office or warehouses, while product and tech teams worked from home in the last few months, but companies are now telling all employees to stay home home once again.
“We have decided to work from home entirely again but are still seeing cases among employees and their families,” said Rohit Chennamaneni, co-founder of human resources (HR) software startup Darwinbox.
Startups are still assessing the impact of the pandemic, both in terms of lockdowns hampering movement of goods and having a reduced workforce. Some e-commerce and travel firms may even have to consider another round of cost-cutting and possibly layoffs, a partner at a venture capital firm told Moneycontrol, requesting anonymity.
For most internet startups the pandemic has been a blessing in disguise, driving digital adoption, increasing efficiency and leading to record growth and funding from venture capitalists. India has seen 11 unicorns – private firms valued at over a billion dollars – so far this year, the same as all of last year. Moneycontrol reported that startups are amidst a funding party, with capital flowing freely at high valuations for unproven business models.
Over the last month there has been a sharp contrast as internet firms have dealt with the onslaught of the second wave of the virus on the one hand, and new funding offers on the other hand. Founders are still unsure of the business impact.
“While business is doing well for now, if the second wave continues unabated, we may have to check projections again. There are overall tailwinds for the business, when things are bad, companies – our clients take longer to make decisions. Sales cycles could get extended. We have to wait and watch,” said Chennamaneni.
Bhate too said he will have to evaluate things as they come.
Founders are falling back on their experience of surviving the first wave of the virus last April and are trying to prioritise employee safety and well-being above all else.
“It’s worrying to see that folks are testing positive in spite of being virtually in isolation at home. The acceleration of the spread is quite concerning,” Bhate says.