Why investors say this is a good time for startups

Forbes

On April 16, Yellow Messenger, a Bengaluru-based startup, announced it had raised $20 million in Series B funding, from Lightspeed India Partners, an existing investor, and its US arm Lightspeed Venture Partners. There are other startups, too, that have raised funding amid the Covid-19 crisis. Itilite and Zupee, for instance, raised money from investors, including Matrix Partners India, Greenoaks Capital, Falcon Edge Capital and WestCap Group, while Camp K12 raised money from Matrix and SAIF Partners. All of these were announced in April.

The coronavirus pandemic has impacted the venture capital (VC) industry in a way that will see VC firms not close for business or even wait and watch, but proactively chase deals in sectors and with founders whom they see as potential winners in the post Covid-19 world.“We are working closely with our entrepreneurs to navigate these tumultuous times,” says Akshay Bhushan, partner at Lightspeed India Partners. “At the same time, we continue to look at new investment opportunities.”

In fact, in a survey by the VC firm 100X.VC, 70 percent of respondent VC firms said they are seeking lower valuations from founders, and that 86 percent of investors will now look at sectors that are positively affected by the crisis.“There will be a recalibrating of the investment theses from the VCs’ side,” says Sanjay Mehta, founding partner at 100X.VC. “We are clearly seeing that there are specific winners and losers, among the startups. From an overall VC industry perspective, there is going to be a reset.”

The pandemic is forcing companies to follow financial discipline and strengthen their core businesses, and they might emerge from this crisis in a stronger position, long term, says Bhushan. Lightspeed is seeing an uplift in categories such as e-groceries (both in business-to-business and business-to-consumer models), a pick-up in usage and downloads of edtech and content-plus-social media. The current situation is essentially forcing consumers to try digital services and the VC firm expects this trend to rise in the post Covid-19 world.

On the enterprise front, companies are being forced to evaluate how to ensure business continuity and are tapping technology for this. 

Zoom, a popular videoconferencing app, is a universal example, but this trend extends to customer support, sales and even on-ground functions like logistics. “We expect this increase in technology adoption by enterprises will lead to long-term productivity gains and should be a catalyst for the industry to adopt software in their operations at a greater pace even post Covid-19,” Bhushan adds.

Yellow Messenger, in which Lightspeed has invested, enables artificial intelligence chatbots for enterprises. Given the remote working model in the current environment, Yellow Messenger helps companies continue providing customer support with less dependence on the traditional call centre model. The startup’s technologies are seeing adoption globally.

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