Outlook 2021: 6 key trends the startup ecosystem will see in the new normal

From a year of uncertainty, startups have already taken steps towards stability and acceleration. Here are six key trends expect to lead the ecosystem in 2021.

Outlook 2021: 6 key trends the startup ecosystem will see in the new normal

Friday January 01, 2021,

5 min Read

The past year, marked by a unique set of circumstances arising out of the COVID-19 pandemic, has brought unprecedented changes in the startup ecosystem and consequently changed entrepreneurs’ outlook on success completely.

“At the start of April 2020, we felt our business would come to a halt. Though we recovered, the uncertainty we felt at the start of this pandemic was unnerving,” says Swati Bhargava, Founder of coupons and cashback website CashKaro, referring to the impact on her company due to restrictions imposed during the nationwide lockdown.

Entrepreneurs did adapt quickly and effectively to the new normal of rapidly changing market dynamics, evolving customer needs and unique operating conditions.

“Volatility brought on by the pandemic, combined with uncertainty both in India and abroad, undoubtedly impacted the startup ecosystem,” says LetsTransport Co-founder and CEO Pushkar Singh. “While no instruction manual has even been written to handle such a situation, the Indian ecosystem showed agility and resilience both at the start of the pandemic and thereafter.”

As Bhargava adds: “We started looking for a more diverse business model, partnering with OTTs, education platforms and subscription services that do not rely on online shopping and developed those verticals for CashKaro.”

Whether it was solving operational challenges or raising the morale of employees working remotely with virtual quizzes, musical evenings, karaoke sessions and townhalls, Indian startups rose to the occasion.

As a result, India continues to be ahead of several Southeast Asian countries in terms of attracting more foreign investors.

From a year of uncertainty, startups have already taken steps towards stability and acceleration. Overall, there has been a marked shift to digitisation across various strata of society and industries. Trust and convenience have emerged as key requisites, especially due to the virus-induced focus on health and safety, a feature that will continue in the new year.

Here are other key trends expected in 2021.

Building new focus areas

According to Meena Ganesh, managing director and chief executive of Portea Medical, 2021 will be all about flight to organised brands, safety and reliability rather than just operations, profits or pricing. There will be an increased focus on preventive healthcare, building immunity, resilience, general wellness, hygiene and nutrition.

“Sectors such as e-health, fintech, edtech, e-commerce and consumer tech will continue to attract investors,” says Harshit Vyas, Oyo senior vice-president and chief operating officer for franchise business (India and South Asia). “AI (artificial intelligence) and ML (machine learning) technologies will also continue to witness a major surge with respect to investment.”

Innovative team management models

The startup ecosystem expects innovative team management models for different teams to manage their energies and collaborate effectively in the new year.

“Teams and managers would need to ensure that the energy and morale stay high as remote work will continue well into 2021,” says Shop101 founder and chief executive Abhinav Jain. “Also, a lot of great businesses will emerge from the cohort of startups in the next few years in line with a clear shift in consumer preference towards digital.”

Increased digital adoption

Digital adoption will gain even more traction as consumer and business habits across sectors, particularly education and payments, have already started changing. “Businesses, both online and offline, are keener than ever to partner with digital payment platforms to accelerate their growth,” says Karthik Raghupathy, vice-president of strategy and business development at PhonePe. “In particular, offline merchants are embracing additional business models including home delivery while setting up a digital presence.”

A more cautious approach to growth

Scaling and expansion are natural growth strategies for startups. However, in the new normal these activities will be slow and cautious. The focus will be more on building unit economics, streamlining revenue streams and strengthening the team.

Circumspection on huge capital investments

Although investor momentum has been positive, it will continue to be guided by caution. Certainly, this will impact the deal ticket size, valuation and time to close funding rounds. But exceptional entrepreneurs should not face a challenge. Also, if startups continue to solve a genuine problem with tech-first solutions, financial support from investors will always be forthcoming.

Higher reliance on the gig economy

As a return to physical workplaces has become difficult due to restrictions and the need to adhere to safety and hygiene rules, startups have accepted work from home as part of the new organisation structure. This has opened up opportunities for the gig worker in India.

According to a January 2020 Assocham report, India’s gig sector is expected to touch $455 billion by 2023 at a compound annual growth rate of 17 percent. Given limited resources and higher attrition rates, startups, particularly those at an early stage, will leverage this opportunity.

Looking ahead

While the Indian startup ecosystem has come a long way in the past decade, 2020 has been a year of course correction for many. As OYO’s Harshit says:

“A great business idea is born out of a gap that can quickly turn into an opportunity because nobody else directly addressed it. At the idea stage, every aspiring entrepreneur should be able to identify unmet needs in a consumer’s day-to-day life, especially in times of crisis. India saw many such startups embracing the unknown in unchartered territories.”

Young startups are solving last-mile logistics problems faced in hyperlocal operations through a focus on building core infrastructure IP (intellectual property).

“Overall, I believe the Indian ecosystem is reaching a stage where you will see democratisation happening in a variety of sectors,” says Shop101’s Abhinav. “Whether it is access to different modes of local commute like cycles, bikes, shuttles and cabs or the ability to learn at any age—from coding to musical instruments—or even democratising entrepreneurship, the time has come for technology to be a great leveller.”

(Edited by Lena Saha)