[YS Learn] The multiple ways impact investing will transform in a post-COVID world

The COVID-19 pandemic has changed the way investors view startups, and affected investments, valuations, and technology focus. How has coronavirus changed impact investing and what does it now mean for valuations?

The coronavirus pandemic has not only transformed the way businesses and startups think, it has also altered investor behaviour and changed how they analyse companies. 

Roopa Kudva, Managing Director of Omidyar Network India, an investment firm focussed on social impact believes that impact investing will become mainstream and focus deeper on technology in the wake of the coronavirus pandemic. 

In a conversation with Shradha Sharma, Founder and CEO, YourStory, Roopa delineated a few of the ways in which impact investing is set to change in a post-coronavirus world. 

  1. Over the past few years, VC funding hasn’t just served people at the top of the pyramid in India; it has also helped middle and lower middle-income people. After COVID-19, the focus will further shift towards the needs of the lower income population, and towards getting small businesses up and running.  
  2. People are becoming more comfortable with technology and the exposure to digital has increased. “Physical distancing is going to be the norm for some time now. We think businesses are going to shift to online rather than offline models,” Roopa said. 
  3. Roopa said the impact on valuations would depend on different sectors. Valuations of some sectors such as edtech, digital health, retail trade (for essential items), and digital content would not be impacted. In fact, there may be an increase in valuations in these sectors. 
  4. In sectors where there is a pressure to raise capital or the impact of COVID-19 is unclear, medium-term valuations will be under pressure. Sectors like fintech or companies that serve the bottom 60 percent of the population will be negatively impacted. Also, companies with stalled operations will face a negative impact. 
  5. Apart from the sector, impact will also depend on how much cash the startup has in their books. 
Edited by Teja Lele